Trade-Ideas: Yelp (YELP) Is Today's Weak On High Relative Volume 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 Yelp ( YELP) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Yelp as such a stock due to the following factors:

  • YELP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $536.8 million.
  • YELP has traded 4.0 million shares today.
  • YELP is trading at 2.94 times the normal volume for the stock at this time of day.
  • YELP is trading at a new low 3.00% 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 YELP:

Yelp Inc. operates a platform that connects people with local businesses in the United States. YELP has a PE ratio of 94.0. Currently there are 16 analysts that rate Yelp a buy, 2 analysts rate it a sell, and 12 rate it a hold.

The average volume for Yelp has been 3.8 million shares per day over the past 30 days. Yelp has a market cap of $3.1 billion and is part of the technology sector and internet industry. The stock has a beta of 2.47 and a short float of 19.3% with 0.84 days to cover. Shares are down 14.1% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Yelp 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 compelling growth in net income. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

Highlights from the ratings report include:
  • YELP's very impressive revenue growth greatly exceeded the industry average of 5.9%. Since the same quarter one year prior, revenues leaped by 55.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • YELP has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 7.81, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for YELP INC is currently very high, coming in at 92.66%. Regardless of YELP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, YELP's net profit margin of -1.08% significantly underperformed when compared to the industry average.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Internet Software & Services industry and the overall market, YELP INC's return on equity is below that of both the industry average and the S&P 500.
  • YELP has underperformed the S&P 500 Index, declining 10.87% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.

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