Strong On High Relative Volume: Red Robin Gourmet Burgers (RRGB)

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 Red Robin Gourmet Burgers ( RRGB) as a strong on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Red Robin Gourmet Burgers as such a stock due to the following factors:

  • RRGB has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $25.4 million.
  • RRGB has traded 379,674 shares today.
  • RRGB is trading at 54.53 times the normal volume for the stock at this time of day.
  • RRGB is trading at a new high 14.01% 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 RRGB:

Red Robin Gourmet Burgers, Inc., together with its subsidiaries, develops, operates, and franchises casual-dining and fast-casual restaurants in the United States and Canada. As of December 28, 2014, it had 514 restaurants, including 415 company-owned restaurants and 99 franchised restaurants. RRGB has a PE ratio of 32. Currently there are 6 analysts that rate Red Robin Gourmet Burgers a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Red Robin Gourmet Burgers has been 224,000 shares per day over the past 30 days. Red Robin Gourmet Burgers has a market cap of $1.0 billion and is part of the services sector and leisure industry. The stock has a beta of 0.79 and a short float of 9.2% with 4.32 days to cover. Shares are down 5.2% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Red Robin Gourmet Burgers as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 7.4%. Since the same quarter one year prior, revenues rose by 16.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has increased to $40.64 million or 29.65% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -16.93%.
  • RED ROBIN GOURMET BURGERS's earnings per share declined by 41.7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, RED ROBIN GOURMET BURGERS increased its bottom line by earning $2.25 versus $2.23 in the prior year. This year, the market expects an improvement in earnings ($3.10 versus $2.25).
  • The current debt-to-equity ratio, 0.41, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.28 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

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