Perilous Reversal Watch: Ambarella (AMBA)

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

  • AMBA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $102.8 million.
  • AMBA has traded 276,633 shares today.
  • AMBA is down 7% today.
  • AMBA was up 7.5% yesterday.

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More details on AMBA:

Ambarella, Inc. develops semiconductor processing solutions for video that enable high-definition (HD) video capture, sharing, and display worldwide. AMBA has a PE ratio of 43.4. Currently there are 4 analysts that rate Ambarella a buy, 1 analyst rates it a sell, and 4 rate it a hold.

The average volume for Ambarella has been 2.1 million shares per day over the past 30 days. Ambarella has a market cap of $1.6 billion and is part of the technology sector and electronics industry. The stock has a beta of 2.08 and a short float of 28.1% with 4.14 days to cover. Shares are up 53.6% 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 Ambarella as a buy. 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, impressive record of earnings per share growth, compelling growth in net income and good cash flow from operations. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 18.7%. Since the same quarter one year prior, revenues rose by 42.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • AMBA has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 5.34, which clearly demonstrates the ability to cover short-term cash needs.
  • AMBARELLA INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, AMBARELLA INC increased its bottom line by earning $0.85 versus $0.39 in the prior year. This year, the market expects an improvement in earnings ($1.79 versus $0.85).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 100.8% when compared to the same quarter one year prior, rising from $9.13 million to $18.33 million.
  • Net operating cash flow has significantly increased by 142.54% to $16.95 million when compared to the same quarter last year. In addition, AMBARELLA INC has also vastly surpassed the industry average cash flow growth rate of 11.95%.

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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