Rada Electronics Industries (RADA) Weak On High Volume

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.

Trade-Ideas LLC identified Rada Electronics Industries ( RADA) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Rada Electronics Industries as such a stock due to the following factors:

  • RADA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $5.9 million.
  • RADA has traded 2.9 million shares today.
  • RADA is trading at 47.01 times the normal volume for the stock at this time of day.
  • RADA is trading at a new low 3.10% 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 RADA:

RADA Electronic Industries Ltd., a defense electronics contractor, is engaged in the development, manufacture, and sale of defense electronics to various air forces and companies worldwide.

The average volume for Rada Electronics Industries has been 121,600 shares per day over the past 30 days. Rada has a market cap of $15.1 million and is part of the services sector and wholesale industry. The stock has a beta of -0.64 and a short float of 4.2% with 0.13 days to cover. Shares are up 16% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Rada Electronics Industries as a sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk and poor profit margins.

Highlights from the ratings report include:
  • The debt-to-equity ratio is very high at 2.64 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.35, which clearly demonstrates the inability to cover short-term cash needs.
  • The gross profit margin for RADA ELECTRONIC INDS is currently lower than what is desirable, coming in at 27.15%. Regardless of RADA's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, RADA's net profit margin of -4.23% significantly underperformed when compared to the industry average.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. When compared to other companies in the Electronic Equipment, Instruments & Components industry and the overall market, RADA ELECTRONIC INDS's return on equity is below that of both the industry average and the S&P 500.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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.
  • RADA ELECTRONIC INDS reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, RADA ELECTRONIC INDS reported poor results of -$0.29 versus -$0.22 in the prior year.

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