Strong On High Volume: EarthLink Holdings (ELNK)

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 EarthLink Holdings ( ELNK) as a strong on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified EarthLink Holdings as such a stock due to the following factors:

  • ELNK has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $7.1 million.
  • ELNK has traded 285,535 shares today.
  • ELNK is trading at 4.93 times the normal volume for the stock at this time of day.
  • ELNK is trading at a new high 4.08% above yesterday's close.

'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into 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. 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 ELNK:

EarthLink Holdings Corp., together with its subsidiaries, provides managed network, security, and cloud services to business and residential customers in the United States. The company operates in two segments, Business Services and Consumer Services. The stock currently has a dividend yield of 4.1%. Currently there are 2 analysts that rate EarthLink Holdings a buy, 1 analyst rates it a sell, and none rate it a hold.

The average volume for EarthLink Holdings has been 749,400 shares per day over the past 30 days. EarthLink has a market cap of $499.4 million and is part of the technology sector and telecommunications industry. The stock has a beta of 0.98 and a short float of 6.4% with 5.13 days to cover. Shares are up 10.5% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates EarthLink Holdings as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and generally higher debt management risk.

Highlights from the ratings report include:
  • Powered by its strong earnings growth of 61.53% and other important driving factors, this stock has surged by 43.49% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • EARTHLINK HOLDINGS CORP 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, EARTHLINK HOLDINGS CORP continued to lose money by earning -$0.71 versus -$5.25 in the prior year. This year, the market expects an improvement in earnings (-$0.66 versus -$0.71).
  • The gross profit margin for EARTHLINK HOLDINGS CORP is rather high; currently it is at 54.16%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -3.71% is in-line with the industry average.
  • The debt-to-equity ratio is very high at 9.71 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, ELNK's quick ratio is somewhat strong at 1.04, demonstrating the ability to handle short-term liquidity needs.
  • Net operating cash flow has decreased to $18.87 million or 11.45% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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