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

  • CAVM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $24.7 million.
  • CAVM has traded 89,265 shares today.
  • CAVM is trading at 4.47 times the normal volume for the stock at this time of day.
  • CAVM is trading at a new low 5.00% 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 CAVM:

Cavium, Inc. designs, develops, and markets semiconductor processors for intelligent and secure networks in United States and internationally. Currently there are 12 analysts that rate Cavium a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Cavium has been 664,300 shares per day over the past 30 days. Cavium has a market cap of $4.0 billion and is part of the technology sector and electronics industry. The stock has a beta of 1.53 and a short float of 6.5% with 8.42 days to cover. Shares are up 18.3% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Cavium as a hold. 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 and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 1.2%. Since the same quarter one year prior, revenues rose by 24.8%. 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.
  • CAVM's debt-to-equity ratio is very low at 0.14 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.83, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for CAVIUM INC is currently very high, coming in at 73.65%. Regardless of CAVM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CAVM's net profit margin of -11.88% significantly underperformed when compared to the industry average.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income has significantly decreased by 6533.7% when compared to the same quarter one year ago, falling from $0.19 million to -$12.03 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, CAVIUM INC's return on equity significantly trails that of both the industry average and the S&P 500.

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