Today's Weak On High Volume Stock: Cree (CREE)

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

  • CREE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $58.7 million.
  • CREE has traded 278,381 shares today.
  • CREE is trading at 2.18 times the normal volume for the stock at this time of day.
  • CREE is trading at a new low 3.02% 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 CREE:

Cree, Inc. develops, manufactures, and sells lighting-class light emitting diode (LED), lighting, and semiconductor products for power and radio-frequency (RF) applications in the United States, China, Europe, South Korea, Japan, Malaysia, Taiwan, and internationally. CREE has a PE ratio of 68. Currently there are 2 analysts that rate Cree a buy, 2 analysts rate it a sell, and 10 rate it a hold.

The average volume for Cree has been 1.9 million shares per day over the past 30 days. Cree has a market cap of $3.3 billion and is part of the technology sector and electronics industry. The stock has a beta of 1.92 and a short float of 20.4% with 9.32 days to cover. Shares are down 5.4% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Cree as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:
  • CREE's revenue growth has slightly outpaced the industry average of 0.5%. Since the same quarter one year prior, revenues slightly increased by 1.1%. 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.
  • CREE's debt-to-equity ratio is very low at 0.06 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 4.99, which clearly demonstrates the ability to cover short-term cash needs.
  • CREE INC 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, CREE INC increased its bottom line by earning $1.01 versus $0.74 in the prior year. This year, the market expects an improvement in earnings ($1.05 versus $1.01).
  • 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 Semiconductors & Semiconductor Equipment industry. The net income has significantly decreased by 97.7% when compared to the same quarter one year ago, falling from $28.16 million to $0.65 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, CREE INC's return on equity significantly trails that of both the industry average and the S&P 500.

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