Strong On High Relative Volume: ServiceSource International (SREV)

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 ServiceSource International ( SREV) as a strong on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified ServiceSource International as such a stock due to the following factors:

  • SREV has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $2.8 million.
  • SREV has traded 235,709 shares today.
  • SREV is trading at 8.18 times the normal volume for the stock at this time of day.
  • SREV is trading at a new high 5.11% above yesterday's close.

'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into 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. 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 SREV:

ServiceSource International, Inc. provides recurring revenue management, maintenance, support, and subscription for technology and technology-enabled healthcare and life sciences companies. The company operates in two segments: Managed Services, and Cloud and Business Intelligence. Currently there are 4 analysts that rate ServiceSource International a buy, 1 analyst rates it a sell, and 1 rates it a hold.

The average volume for ServiceSource International has been 508,400 shares per day over the past 30 days. ServiceSource International has a market cap of $354.9 million and is part of the technology sector and computer software & services industry. The stock has a beta of 2.40 and a short float of 10.2% with 7.39 days to cover. Shares are down 10.9% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates ServiceSource International as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself 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 significantly underperformed when compared to that of the S&P 500 and the IT Services industry. The net income has significantly decreased by 580.8% when compared to the same quarter one year ago, falling from -$1.99 million to -$13.54 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 IT Services industry and the overall market, SERVICESOURCE INTL INC'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 -$7.57 million or 930.73% 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 share price of SERVICESOURCE INTL INC has not done very well: it is down 9.21% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • SERVICESOURCE INTL INC 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. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, SERVICESOURCE INTL INC reported poor results of -$1.14 versus -$0.29 in the prior year. This year, the market expects an improvement in earnings (-$0.18 versus -$1.14).

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