Dealertrack Technologies (TRAK): Today's Weak On High Volume 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 Dealertrack Technologies ( TRAK) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Dealertrack Technologies as such a stock due to the following factors:

  • TRAK has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $18.3 million.
  • TRAK has traded 188,439 shares today.
  • TRAK is trading at 18.71 times the normal volume for the stock at this time of day.
  • TRAK is trading at a new low 4.08% below yesterday's close.

'Weak on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as material stock news, analyst downgrades, insider selling, selling from 'superinvestors,' or that hedge funds and traders are piling out of a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize (or avoid losses by trimming weak positions). In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on TRAK:

Dealertrack Technologies, Inc. provides Web-based software solutions and services to the automotive retail industry in the United States and Canada. Currently there are 5 analysts that rate Dealertrack Technologies a buy, 1 analyst rates it a sell, and 1 rates it a hold.

The average volume for Dealertrack Technologies has been 449,200 shares per day over the past 30 days. Dealertrack has a market cap of $2.6 billion and is part of the technology sector and internet industry. The stock has a beta of 1.29 and a short float of 13.9% with 19.04 days to cover. Shares are up 2.2% year-to-date as of the close of trading on Wednesday.

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 Dealertrack Technologies as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • TRAK's very impressive revenue growth greatly exceeded the industry average of 28.2%. Since the same quarter one year prior, revenues leaped by 87.4%. 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.
  • Net operating cash flow has significantly increased by 137.12% to $48.07 million when compared to the same quarter last year. In addition, DEALERTRACK TECHNOLOGIES INC has also vastly surpassed the industry average cash flow growth rate of 25.93%.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet Software & Services industry. The net income has significantly decreased by 63.6% when compared to the same quarter one year ago, falling from $5.80 million to $2.11 million.
  • 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. Compared to other companies in the Internet Software & Services industry and the overall market, DEALERTRACK TECHNOLOGIES INC's return on equity significantly trails that of both the industry average and the S&P 500.

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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