Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified RCS Capital ( RCAP) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified RCS Capital as such a stock due to the following factors:

  • RCAP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $17.4 million.
  • RCAP has traded 160,813 shares today.
  • RCAP is down 3.1% today.
  • RCAP was up 5.7% yesterday.

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More details on RCAP:

RCS Capital Corporation, through its subsidiaries, is engaged in the wholesale broker-dealer, and investment banking and capital markets business activities. The stock currently has a dividend yield of 3%. Currently there is 1 analyst that rates RCS Capital a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for RCS Capital has been 516,900 shares per day over the past 30 days. RCS has a market cap of $1.5 billion and is part of the financial sector and financial services industry. Shares are up 29.8% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates RCS Capital as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and poor profit margins.

Highlights from the ratings report include:
  • RCAP's very impressive revenue growth greatly exceeded the industry average of 2.6%. Since the same quarter one year prior, revenues leaped by 177.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, RCAP's share price has jumped by 42.43%, exceeding the performance of the broader market during that same time frame. Although RCAP had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
  • Compared to other companies in the Capital Markets industry and the overall market, RCS CAPITAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for RCS CAPITAL CORP is rather low; currently it is at 15.30%. Regardless of RCAP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, RCAP's net profit margin of 7.55% is significantly lower than the industry average.
  • Net operating cash flow has significantly decreased to -$108.86 million or 468.00% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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