Vipshop Holdings Ltd ADR A (VIPS) Roof Leaking Today

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 Vipshop Holdings Ltd ADR A ( VIPS) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Vipshop Holdings Ltd ADR A as such a stock due to the following factors:

  • VIPS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $360.5 million.
  • VIPS has traded 13.1 million shares today.
  • VIPS is trading at 3.07 times the normal volume for the stock at this time of day.
  • VIPS crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

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More details on VIPS:

Vipshop Holdings Limited, through its subsidiaries, operates as an online discount retailer for various brands in the People's Republic of China. VIPS has a PE ratio of 79. Currently there are 9 analysts that rate Vipshop Holdings Ltd ADR A a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Vipshop Holdings Ltd ADR A has been 6.9 million shares per day over the past 30 days. Vipshop Holdings Ltd ADR A has a market cap of $15.0 billion and is part of the services sector and retail industry. Shares are up 30.4% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Vipshop Holdings Ltd ADR A as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity, impressive record of earnings per share growth, compelling growth in net income and solid stock price performance. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:
  • VIPS's very impressive revenue growth greatly exceeded the industry average of 19.1%. Since the same quarter one year prior, revenues leaped by 108.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • VIPSHOP HOLDINGS LTD -ADR 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, VIPSHOP HOLDINGS LTD -ADR increased its bottom line by earning $0.23 versus $0.09 in the prior year. This year, the market expects an improvement in earnings ($0.54 versus $0.23).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Internet & Catalog Retail industry. The net income increased by 122.8% when compared to the same quarter one year prior, rising from $25.40 million to $56.58 million.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Internet & Catalog Retail industry and the overall market, VIPSHOP HOLDINGS LTD -ADR's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Powered by its strong earnings growth of 109.30% and other important driving factors, this stock has surged by 68.06% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively 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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