BroadSoft (BSFT) Is Weak On High Volume Today

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

  • BSFT has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $15.1 million.
  • BSFT has traded 77,741 shares today.
  • BSFT is trading at 6.09 times the normal volume for the stock at this time of day.
  • BSFT is trading at a new low 3.00% 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 BSFT:

BroadSoft, Inc. BSFT has a PE ratio of 1074.0. Currently there are 6 analysts that rate BroadSoft a buy, 1 analyst rates it a sell, and 2 rate it a hold.

The average volume for BroadSoft has been 285,600 shares per day over the past 30 days. BroadSoft has a market cap of $935.6 million and is part of the technology sector and computer software & services industry. The stock has a beta of 1.72 and a short float of 4.3% with 2.15 days to cover. Shares are up 11% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates BroadSoft as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 0.6%. Since the same quarter one year prior, revenues rose by 26.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • BROADSOFT INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, BROADSOFT INC turned its bottom line around by earning $0.02 versus -$0.31 in the prior year. This year, the market expects an improvement in earnings ($1.55 versus $0.02).
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. 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 gross profit margin for BROADSOFT INC is currently very high, coming in at 83.56%. Regardless of BSFT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 13.81% trails the industry average.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Software industry and the overall market, BROADSOFT INC's return on equity significantly trails that of both the industry average and the S&P 500.

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