Today's Weak On High Volume Stock: Infinera (INFN)

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

  • INFN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $28.4 million.
  • INFN has traded 341,408 shares today.
  • INFN is trading at 2.45 times the normal volume for the stock at this time of day.
  • INFN is trading at a new low 3.09% 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 INFN:

Infinera Corporation provides optical transport networking equipment, software, and services for telecommunications service providers, Internet content providers, cable operators, wholesale and enterprise carriers, research and education institutions, and government entities worldwide. INFN has a PE ratio of 84. Currently there are 7 analysts that rate Infinera a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Infinera has been 1.8 million shares per day over the past 30 days. Infinera has a market cap of $2.6 billion and is part of the technology sector and telecommunications industry. The stock has a beta of 1.36 and a short float of 11.9% with 8.74 days to cover. Shares are up 36.2% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Infinera as a buy. 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, impressive record of earnings per share growth, compelling growth in net income and good cash flow from operations. We feel its strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 2.8%. Since the same quarter one year prior, revenues rose by 30.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • INFN's debt-to-equity ratio is very low at 0.23 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 3.08, which clearly demonstrates the ability to cover short-term cash needs.
  • INFINERA CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, INFINERA CORP turned its bottom line around by earning $0.10 versus -$0.27 in the prior year. This year, the market expects an improvement in earnings ($0.67 versus $0.10).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Communications Equipment industry. The net income increased by 382.7% when compared to the same quarter one year prior, rising from -$4.37 million to $12.37 million.
  • Net operating cash flow has significantly increased by 228.56% to $19.84 million when compared to the same quarter last year. In addition, INFINERA CORP has also vastly surpassed the industry average cash flow growth rate of -73.22%.

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