Trade-Ideas: Rent-A-Center (RCII) Is Today's Weak On High Relative 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 Rent-A-Center ( RCII) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Rent-A-Center as such a stock due to the following factors:

  • RCII has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $22.4 million.
  • RCII has traded 105,687 shares today.
  • RCII is trading at 5.91 times the normal volume for the stock at this time of day.
  • RCII is trading at a new low 3.04% 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 RCII:

Rent-A-Center, Inc., together with its subsidiaries, leases household durable goods to customers on a rent-to-own basis. The company operates in four segments: Core U.S., Acceptance Now, International, and Franchising. The stock currently has a dividend yield of 2.7%. RCII has a PE ratio of 20.8. Currently there are 4 analysts that rate Rent-A-Center a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Rent-A-Center has been 818,800 shares per day over the past 30 days. Rent-A-Center has a market cap of $1.8 billion and is part of the services sector and specialty retail industry. Shares are up 0.4% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Rent-A-Center as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.9%. Since the same quarter one year prior, revenues slightly increased by 2.0%. 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.
  • The debt-to-equity ratio is somewhat low, currently at 0.70, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels.
  • The gross profit margin for RENT-A-CENTER INC is currently very high, coming in at 93.58%. Regardless of RCII's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 3.28% trails the industry average.
  • In its most recent trading session, RCII has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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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