Trade-Ideas: Applied Optoelectronics (AAOI) Is Today's Weak On High Relative Volume Stock

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

  • AAOI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $6.1 million.
  • AAOI has traded 111,713 shares today.
  • AAOI is trading at 7.47 times the normal volume for the stock at this time of day.
  • AAOI is trading at a new low 5.11% 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 AAOI:

Applied Optoelectronics, Inc. designs and manufactures optical communications products for Internet data center, cable television (CATV), and fiber-to-the-home markets. AAOI has a PE ratio of 76. Currently there are 6 analysts that rate Applied Optoelectronics a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Applied Optoelectronics has been 266,400 shares per day over the past 30 days. Applied Optoelectronics has a market cap of $249.1 million and is part of the technology sector and electronics industry. Shares are up 48.6% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

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

Highlights from the ratings report include:
  • The share price of APPLIED OPTOELECTRONICS INC has not done very well: it is down 14.88% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
  • 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 Communications Equipment industry. The net income has significantly decreased by 894.1% when compared to the same quarter one year ago, falling from $0.09 million to -$0.68 million.
  • Despite currently having a low debt-to-equity ratio of 0.34, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.00 is sturdy.
  • Compared to other companies in the Communications Equipment industry and the overall market on the basis of return on equity, APPLIED OPTOELECTRONICS INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • APPLIED OPTOELECTRONICS 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, APPLIED OPTOELECTRONICS INC increased its bottom line by earning $0.28 versus $0.00 in the prior year. This year, the market expects an improvement in earnings ($1.00 versus $0.28).

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