Weak On High Volume: NQ Mobile (NQ)

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

  • NQ has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $3.5 million.
  • NQ has traded 261,955 shares today.
  • NQ is trading at 4.80 times the normal volume for the stock at this time of day.
  • NQ is trading at a new low 3.23% 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 NQ:

NQ Mobile Inc. provides mobile Internet services in the People's Republic of China and internationally. The company provides products and services in the areas of mobile security, privacy, productivity, personalized cloud, and family protection. NQ has a PE ratio of 12.

The average volume for NQ Mobile has been 1.1 million shares per day over the past 30 days. NQ Mobile has a market cap of $318.1 million and is part of the technology sector and computer software & services industry. Shares are down 5.1% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates NQ Mobile as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, poor profit margins, 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 Software industry. The net income has significantly decreased by 396.5% when compared to the same quarter one year ago, falling from -$4.28 million to -$21.23 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 Software industry and the overall market, NQ MOBILE INC -ADR's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for NQ MOBILE INC -ADR is currently lower than what is desirable, coming in at 29.60%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -23.67% is significantly below that of the industry average.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 64.23%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 228.57% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • NQ MOBILE INC -ADR 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, NQ MOBILE INC -ADR reported poor results of -$0.98 versus -$0.04 in the prior year. This year, the market expects an improvement in earnings ($0.32 versus -$0.98).

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