Today's Weak On High Volume Stock: China Mobile Games And Entertainment Group (CMGE)

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 China Mobile Games and Entertainment Group ( CMGE) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified China Mobile Games and Entertainment Group as such a stock due to the following factors:

  • CMGE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $7.4 million.
  • CMGE has traded 85,811 shares today.
  • CMGE is trading at 3.28 times the normal volume for the stock at this time of day.
  • CMGE is trading at a new low 3.18% 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 CMGE:

China Mobile Games and Entertainment Group Limited, through its subsidiaries, develops, operates, and publishes mobile games primarily in the People's Republic of China. CMGE has a PE ratio of 17. Currently there is 1 analyst that rates China Mobile Games and Entertainment Group a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for China Mobile Games and Entertainment Group has been 323,600 shares per day over the past 30 days. China Mobile Games and Entertainment Group has a market cap of $628.1 million and is part of the technology sector and computer software & services industry. Shares are up 13.7% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates China Mobile Games and Entertainment Group 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 increase in stock price during the past year. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.

Highlights from the ratings report include:
  • CMGE's very impressive revenue growth greatly exceeded the industry average of 1.4%. Since the same quarter one year prior, revenues leaped by 168.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • CMGE 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 3.04, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for CHINA MOBILE GAMES -ADR is rather high; currently it is at 58.81%. Regardless of CMGE's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 16.06% trails the industry average.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. When compared to other companies in the Software industry and the overall market, CHINA MOBILE GAMES -ADR's return on equity is below that of both the industry average and the S&P 500.

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