Today's Weak On High Volume Stock: LookSmart (LOOK)

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

  • LOOK has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $2.6 million.
  • LOOK has traded 140,163 shares today.
  • LOOK is trading at 34.70 times the normal volume for the stock at this time of day.
  • LOOK is trading at a new low 7.14% 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 LOOK:

LookSmart, Ltd., a digital advertising solutions company, provides solutions for search and display advertising customers in the United States, Europe, the Middle East, and Africa.

The average volume for LookSmart has been 312,100 shares per day over the past 30 days. LookSmart has a market cap of $6.8 million and is part of the technology sector and internet industry. The stock has a beta of -0.63 and a short float of 2.9% with 0.03 days to cover. Shares are up 64.3% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates LookSmart as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Internet Software & Services industry and the overall market, LOOKSMART LTD's return on equity significantly trails that of both the industry average and the S&P 500.
  • LOOK has underperformed the S&P 500 Index, declining 20.36% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • LOOKSMART LTD has improved earnings per share by 27.3% 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, LOOKSMART LTD reported poor results of -$1.12 versus -$0.93 in the prior year.
  • The revenue fell significantly faster than the industry average of 5.8%. Since the same quarter one year prior, revenues fell by 38.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • LOOK has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.30 is very weak and demonstrates a lack of ability to pay short-term obligations.

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