Demandware (DWRE) Highlighted As Today's Perilous Reversal Stock

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

  • DWRE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $22.7 million.
  • DWRE has traded 290,830 shares today.
  • DWRE is down 3% today.
  • DWRE was up 5.2% yesterday.

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More details on DWRE:

Demandware, Inc. provides cloud-based digital commerce solutions in the United States, Germany, the United Kingdom, and internationally. Currently there are 9 analysts that rate Demandware a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Demandware has been 595,900 shares per day over the past 30 days. Demandware has a market cap of $2.1 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 0.55 and a short float of 15.8% with 10.35 days to cover. Shares are down 6.5% year-to-date as of the close of trading on Friday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Demandware as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income and weak operating cash flow.

Highlights from the ratings report include:
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Internet Software & Services industry average. The net income has decreased by 8.6% when compared to the same quarter one year ago, dropping from -$8.46 million to -$9.19 million.
  • Net operating cash flow has significantly decreased to $1.98 million or 51.91% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Internet Software & Services industry and the overall market, DEMANDWARE INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • DEMANDWARE INC's earnings per share improvement from the most recent quarter was slightly positive. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, DEMANDWARE INC reported poor results of -$0.70 versus -$0.29 in the prior year. This year, the market expects an improvement in earnings (-$0.06 versus -$0.70).
  • The gross profit margin for DEMANDWARE INC is currently very high, coming in at 76.83%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -25.45% is in-line with the industry average.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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