Perilous Reversal Watch: 500.com (WBAI)

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 500.com ( WBAI) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified 500.com as such a stock due to the following factors:

  • WBAI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $48.5 million.
  • WBAI has traded 93,472 shares today.
  • WBAI is down 7.4% today.
  • WBAI was up 8.1% yesterday.

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More details on WBAI:

500.com Limited provides online sports lottery services in the People's Republic of China. It operates as an aggregator and processor of lottery purchase orders from its registered user accounts. WBAI has a PE ratio of 25. Currently there is 1 analyst that rates 500.com a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for 500.com has been 2.3 million shares per day over the past 30 days. 500.com has a market cap of $588.4 million and is part of the services sector and leisure industry. Shares are up 25.7% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates 500.com as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income and generally disappointing historical performance in the stock itself.

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 Hotels, Restaurants & Leisure industry. The net income has significantly decreased by 83.9% when compared to the same quarter one year ago, falling from $14.15 million to $2.28 million.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 41.06%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 86.66% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • The gross profit margin for 500.COM LTD -ADR is currently very high, coming in at 89.89%. Regardless of WBAI'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 9.80% trails the industry average.
  • In comparison to the other companies in the Hotels, Restaurants & Leisure industry and the overall market, 500.COM LTD -ADR's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • 500.COM LTD -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. 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, 500.COM LTD -ADR increased its bottom line by earning $0.70 versus $0.51 in the prior year. This year, the market expects an improvement in earnings ($1.12 versus $0.70).

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