Water-Logged And Getting Wetter Stock Of The Day: NVIDIA (NVDA)

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 NVIDIA ( NVDA) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified NVIDIA as such a stock due to the following factors:

  • NVDA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $124.9 million.
  • NVDA has traded 3.2 million shares today.
  • NVDA traded in a range 217.6% of the normal price range with a price range of $1.03.
  • NVDA traded below its daily resistance level (quality: 6 days, meaning that the stock is crossing a resistance level set by the last 6 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on NVDA:

NVIDIA Corporation operates as a visual computing company. The company operates through two segments, GPU and Tegra Processors. The stock currently has a dividend yield of 1.7%. NVDA has a PE ratio of 22.1. Currently there are 9 analysts that rate NVIDIA a buy, 4 analysts rate it a sell, and 13 rate it a hold.

The average volume for NVIDIA has been 6.8 million shares per day over the past 30 days. NVIDIA has a market cap of $10.9 billion and is part of the technology sector and electronics industry. The stock has a beta of 1.25 and a short float of 9.1% with 6.49 days to cover. Shares are up 26.2% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates NVIDIA as a buy. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and solid stock price performance. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Semiconductors & Semiconductor Equipment industry average. The net income increased by 32.7% when compared to the same quarter one year prior, rising from $96.45 million to $127.98 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 18.9%. Since the same quarter one year prior, revenues rose by 12.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The current debt-to-equity ratio, 0.32, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 5.59, which clearly demonstrates the ability to cover short-term cash needs.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.

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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