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 Hutchinson Technology ( HTCH) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Hutchinson Technology as such a stock due to the following factors:

  • HTCH has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $3.3 million.
  • HTCH has traded 69,351 shares today.
  • HTCH is trading at 5.97 times the normal volume for the stock at this time of day.
  • HTCH is trading at a new low 5.07% 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 HTCH:

Hutchinson Technology Incorporated researches, designs, develops, manufactures, and supplies suspension assemblies for hard disk drives in Thailand, Hong Kong, the Philippines, Malaysia, the United States, and internationally. Currently there are 2 analysts that rate Hutchinson Technology a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Hutchinson Technology has been 351,200 shares per day over the past 30 days. Hutchinson Technology has a market cap of $105.3 million and is part of the technology sector and electronics industry. The stock has a beta of 2.13 and a short float of 2.9% with 0.88 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 Hutchinson Technology as a sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, disappointing return on equity, weak operating cash flow, poor profit margins and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • Currently the debt-to-equity ratio of 1.50 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with the unfavorable debt-to-equity ratio, HTCH maintains a poor quick ratio of 0.79, which illustrates the inability to avoid short-term cash problems.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Computers & Peripherals industry and the overall market, HUTCHINSON TECHNOLOGY INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$1.82 million or 160.19% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The gross profit margin for HUTCHINSON TECHNOLOGY INC is rather low; currently it is at 24.48%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, HTCH's net profit margin of -7.33% significantly underperformed when compared to the industry average.
  • HTCH has underperformed the S&P 500 Index, declining 24.66% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.

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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