Today's Dead Cat Bounce Stock: WageWorks (WAGE)

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

  • WAGE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $14.0 million.
  • WAGE has traded 114,463 shares today.
  • WAGE is up 3.3% today.
  • WAGE was down 8.3% yesterday.

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More details on WAGE:

WageWorks, Inc. provides consumer-directed benefits programs (CDBs) to employees to save money on taxes in the United States. WAGE has a PE ratio of 101.3. Currently there are 6 analysts that rate WageWorks a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for WageWorks has been 254,900 shares per day over the past 30 days. WageWorks has a market cap of $1.8 billion and is part of the services sector and diversified services industry. The stock has a beta of 0.74 and a short float of 3.8% with 4.37 days to cover. Shares are down 21.5% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates WageWorks as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 1.3%. Since the same quarter one year prior, revenues rose by 42.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • WAGE's debt-to-equity ratio is very low at 0.28 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.08, which illustrates the ability to avoid short-term cash problems.
  • The gross profit margin for WAGEWORKS INC is rather high; currently it is at 62.03%. 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 3.94% trails the industry average.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Professional Services industry and the overall market, WAGEWORKS INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • Net operating cash flow has decreased to $31.47 million or 31.68% 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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