NetSuite (N) Stock Storming The Castle 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 NetSuite ( N) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified NetSuite as such a stock due to the following factors:

  • N has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $60.4 million.
  • N has traded 481,116 shares today.
  • N is trading at 1.93 times the normal volume for the stock at this time of day.
  • N crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. 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 on. 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 N:

NetSuite Inc. provides cloud-based financials/enterprise resource planning (ERP) and omnichannel commerce software suites in the United States and internationally. Currently there are 9 analysts that rate NetSuite a buy, no analysts rate it a sell, and 11 rate it a hold.

The average volume for NetSuite has been 406,900 shares per day over the past 30 days. NetSuite has a market cap of $7.4 billion and is part of the technology sector and computer software & services industry. Shares are down 12.8% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates NetSuite as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and generally high debt management risk.

Highlights from the ratings report include:
  • 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 Software industry and the overall market, NETSUITE INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The debt-to-equity ratio of 1.18 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, N's quick ratio is somewhat strong at 1.48, demonstrating the ability to handle short-term liquidity needs.
  • The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and the Software industry average. The net income has decreased by 2.1% when compared to the same quarter one year ago, dropping from -$22.23 million to -$22.71 million.
  • NETSUITE INC reported flat earnings per share in the most recent quarter. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, NETSUITE INC reported poor results of -$1.31 versus -$0.96 in the prior year. This year, the market expects an improvement in earnings ($0.32 versus -$1.31).
  • Looking at where the stock is today compared to one year ago, we find that it is higher, and it has outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.

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