Trade-Ideas: Rackspace Hosting (RAX) Is Today's Post-Market Leader 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 Rackspace Hosting ( RAX) as a post-market leader candidate. In addition to specific proprietary factors, Trade-Ideas identified Rackspace Hosting as such a stock due to the following factors:

  • RAX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $56.6 million.
  • RAX is up 3.5% today from today's close.

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More details on RAX:

Rackspace Hosting, Inc., through its subsidiaries, provides cloud computing services and managing Web-based IT systems for small and medium-sized businesses and large enterprises worldwide. RAX has a PE ratio of 60.1. Currently there are 7 analysts that rate Rackspace Hosting a buy, 1 analyst rates it a sell, and 7 rate it a hold.

The average volume for Rackspace Hosting has been 3.1 million shares per day over the past 30 days. Rackspace Hosting has a market cap of $5.3 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 1.57 and a short float of 15% with 8.10 days to cover. Shares are down 4.3% 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 Rackspace Hosting as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and disappointing return on equity.

Highlights from the ratings report include:
  • RAX's revenue growth trails the industry average of 27.5%. Since the same quarter one year prior, revenues rose by 17.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • RAX's debt-to-equity ratio is very low at 0.07 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, RAX has a quick ratio of 1.69, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has increased to $124.54 million or 17.26% when compared to the same quarter last year. Despite an increase in cash flow, RACKSPACE HOSTING INC's average is still marginally south of the industry average growth rate of 25.25%.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Internet Software & Services industry and the overall market, RACKSPACE HOSTING INC's return on equity is below that of both the industry average and the S&P 500.
  • RAX has underperformed the S&P 500 Index, declining 24.50% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.

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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