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

  • DGI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $9.7 million.
  • DGI has traded 72,609 shares today.
  • DGI is trading at 4.63 times the normal volume for the stock at this time of day.
  • DGI is trading at a new low 6.03% 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 DGI:

DigitalGlobe, Inc. provides imagery and imagery information products and services in the United States and internationally. DGI has a PE ratio of 181.4. Currently there are 7 analysts that rate DigitalGlobe a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for DigitalGlobe has been 532,800 shares per day over the past 30 days. DigitalGlobe has a market cap of $2.4 billion and is part of the industrial goods sector and aerospace/defense industry. The stock has a beta of 0.16 and a short float of 15% with 22.76 days to cover. Shares are up 5.4% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates DigitalGlobe as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we find that the growth in the company's net income has been quite unimpressive.

Highlights from the ratings report include:
  • DGI's revenue growth has slightly outpaced the industry average of 2.9%. Since the same quarter one year prior, revenues slightly increased by 9.4%. 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.
  • The debt-to-equity ratio is somewhat low, currently at 0.84, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, DGI has a quick ratio of 1.56, which demonstrates the ability of the company to cover short-term liquidity needs.
  • DIGITALGLOBE INC's earnings per share declined by 22.2% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, DIGITALGLOBE INC turned its bottom line around by earning $0.18 versus -$1.12 in the prior year. This year, the market expects an improvement in earnings ($0.24 versus $0.18).
  • 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.
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Aerospace & Defense industry average. The net income has decreased by 19.2% when compared to the same quarter one year ago, dropping from $15.10 million to $12.20 million.

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