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

  • ICLD has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $24.2 million.
  • ICLD has traded 593,009 shares today.
  • ICLD is up 13.2% today.
  • ICLD was down 26.1% yesterday.

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More details on ICLD:

InterCloud Systems, Inc. provides end-to-end IT and network solutions to the telecommunications service provider and corporate enterprise markets through cloud platforms and professional services in the United States and internationally.

The average volume for InterCloud Systems has been 414,700 shares per day over the past 30 days. InterCloud Systems has a market cap of $51.9 million and is part of the technology sector and computer software & services industry. The stock has a beta of 4.94 and a short float of 4.4% with 0.08 days to cover. Shares are down 8.6% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates InterCloud Systems as a sell. The company's weaknesses can be seen in multiple areas, such as its poor profit margins, weak operating cash flow, generally disappointing historical performance in the stock itself and generally high debt management risk.

Highlights from the ratings report include:
  • The gross profit margin for INTERCLOUD SYSTEMS INC is rather low; currently it is at 21.32%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -28.79% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$1.38 million or 206.32% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Despite the current debt-to-equity ratio of 1.52, it is still below the industry average, suggesting that this level of debt is acceptable within the IT Services industry. Despite the fact that ICLD's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.60 is low and demonstrates weak liquidity.
  • ICLD's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 62.66%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • Compared to other companies in the IT Services industry and the overall market, INTERCLOUD SYSTEMS INC's return on equity significantly trails that of both the industry average and the S&P 500.

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