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 Vonage Holdings ( VG) as a strong on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Vonage Holdings as such a stock due to the following factors:

  • VG has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $4.9 million.
  • VG has traded 121,125 shares today.
  • VG is trading at 3.54 times the normal volume for the stock at this time of day.
  • VG is trading at a new high 3.04% above yesterday's close.

'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into 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. 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 VG:

Vonage Holdings Corp. provides communications services that connect individuals through cloud-connected devices worldwide. The company offers voice and messaging services through session initiation protocol based voice over Internet protocol network. VG has a PE ratio of 47.4. Currently there are 4 analysts that rate Vonage Holdings a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Vonage Holdings has been 1.0 million shares per day over the past 30 days. Vonage has a market cap of $877.4 million and is part of the technology sector and telecommunications industry. The stock has a beta of 0.53 and a short float of 1.8% with 2.88 days to cover. Shares are up 12.1% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Vonage Holdings as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.

Highlights from the ratings report include:
  • VG's revenue growth has slightly outpaced the industry average of 0.9%. Since the same quarter one year prior, revenues slightly increased by 5.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • Net operating cash flow has increased to $27.76 million or 17.89% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -20.84%.
  • 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. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.50 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • 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. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. In comparison to the other companies in the Diversified Telecommunication Services industry and the overall market, VONAGE HOLDINGS CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.

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