FireEye (FEYE) Is Today's Perilous Reversal 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 FireEye ( FEYE) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified FireEye as such a stock due to the following factors:

  • FEYE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $249.7 million.
  • FEYE has traded 564,095 shares today.
  • FEYE is down 3.1% today.
  • FEYE was up 5.2% yesterday.

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More details on FEYE:

FireEye, Inc., together with its subsidiaries, provides cybersecurity solutions for detecting, preventing, and resolving cyber-attacks. Currently there are 11 analysts that rate FireEye a buy, 1 analyst rates it a sell, and 10 rate it a hold.

The average volume for FireEye has been 5.6 million shares per day over the past 30 days. FireEye has a market cap of $6.5 billion and is part of the technology sector and computer software & services industry. Shares are up 30.8% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates FireEye as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Software industry average. The net income has significantly decreased by 32.4% when compared to the same quarter one year ago, falling from -$101.21 million to -$133.96 million.
  • FIREEYE INC's earnings per share declined by 15.8% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, FIREEYE INC reported poor results of -$3.13 versus -$0.45 in the prior year. This year, the market expects an improvement in earnings (-$1.80 versus -$3.13).
  • The gross profit margin for FIREEYE INC is currently very high, coming in at 79.68%. Regardless of FEYE's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, FEYE's net profit margin of -106.85% significantly underperformed when compared to the industry average.
  • Compared to other companies in the Software industry and the overall market, FIREEYE INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • FEYE 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. To add to this, FEYE has a quick ratio of 1.67, which demonstrates the ability of the company to cover short-term liquidity needs.

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