Scientific Games (SGMS) Weak On High Volume

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

  • SGMS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $15.6 million.
  • SGMS has traded 850,272 shares today.
  • SGMS is trading at 30.43 times the normal volume for the stock at this time of day.
  • SGMS is trading at a new low 6.34% 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 SGMS:

Scientific Games Corporation develops technology-based products and services, and associated content for the gaming and lottery industries worldwide. The company operates through three segments: Gaming, Lottery, and Interactive. Currently there are 4 analysts that rate Scientific Games a buy, 1 analyst rates it a sell, and 4 rate it a hold.

The average volume for Scientific Games has been 1.1 million shares per day over the past 30 days. Scientific Games has a market cap of $1.1 billion and is part of the services sector and leisure industry. The stock has a beta of 2.43 and a short float of 27.6% with 12.96 days to cover. Shares are up 1.9% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Scientific Games as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, weak operating cash flow and generally high debt management risk.

Highlights from the ratings report include:
  • SCIENTIFIC GAMES CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, SCIENTIFIC GAMES CORP reported poor results of -$2.76 versus -$0.31 in the prior year. For the next year, the market is expecting a contraction of 62.3% in earnings (-$4.48 versus -$2.76).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income has significantly decreased by 1200.7% when compared to the same quarter one year ago, falling from -$3.62 million to -$47.10 million.
  • 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 Hotels, Restaurants & Leisure industry and the overall market, SCIENTIFIC GAMES CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$29.90 million or 139.59% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The debt-to-equity ratio is very high at 2183.59 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, SGMS's quick ratio is somewhat strong at 1.30, demonstrating the ability to handle short-term liquidity needs.

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