Finisar (FNSR) Marked As A Dead Cat Bounce Stock

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 Finisar ( FNSR) as a "dead cat bounce" (down big yesterday but up big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Finisar as such a stock due to the following factors:

  • FNSR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $15.8 million.
  • FNSR has traded 163,452 shares today.
  • FNSR is up 3% today.
  • FNSR was down 5.5% yesterday.

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More details on FNSR:

Finisar Corporation provides optical subsystems and components for data communication and telecommunication applications in the United States, Malaysia, China, and internationally. FNSR has a PE ratio of 69.4. Currently there are 7 analysts that rate Finisar a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Finisar has been 1.3 million shares per day over the past 30 days. Finisar has a market cap of $2.2 billion and is part of the technology sector and computer hardware industry. The stock has a beta of 0.89 and a short float of 11.5% with 12.55 days to cover. Shares are up 10.8% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Finisar 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 also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:
  • FNSR's revenue growth has slightly outpaced the industry average of 1.2%. Since the same quarter one year prior, revenues slightly increased by 4.2%. 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.
  • Although FNSR's debt-to-equity ratio of 0.20 is very low, it is currently higher than that of the industry average. Along with this, the company maintains a quick ratio of 3.74, which clearly demonstrates the ability to cover short-term cash needs.
  • 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. Compared to other companies in the Communications Equipment industry and the overall market on the basis of return on equity, FINISAR CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • The gross profit margin for FINISAR CORP is currently lower than what is desirable, coming in at 34.91%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.54% significantly trails the industry average.

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