Splunk (SPLK) Highlighted As Weak On High Volume

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

  • SPLK has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $175.4 million.
  • SPLK has traded 978,958 shares today.
  • SPLK is trading at 8.51 times the normal volume for the stock at this time of day.
  • SPLK is trading at a new low 5.01% 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 SPLK:

Splunk, Inc. provides software products that enable organizations to gain real-time operational intelligence in the United States and internationally. The company's products enable users to collect, index, search, explore, monitor, and analyze data regardless of format or source users. Currently there are 21 analysts that rate Splunk a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Splunk has been 1.9 million shares per day over the past 30 days. Splunk has a market cap of $8.7 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 2.19 and a short float of 10% with 3.44 days to cover. Shares are up 20.6% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Splunk as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity and feeble growth in its earnings per share.

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 Software industry. The net income has significantly decreased by 74.8% when compared to the same quarter one year ago, falling from -$32.63 million to -$57.03 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Software industry and the overall market, SPLUNK INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • SPLUNK 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. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, SPLUNK INC reported poor results of -$1.81 versus -$0.75 in the prior year. This year, the market expects an improvement in earnings ($0.12 versus -$1.81).
  • The gross profit margin for SPLUNK INC is currently very high, coming in at 87.78%. Regardless of SPLK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SPLK's net profit margin of -38.69% significantly underperformed when compared to the industry average.
  • Net operating cash flow has increased to $51.53 million or 49.66% when compared to the same quarter last year. In addition, SPLUNK INC has also vastly surpassed the industry average cash flow growth rate of -16.85%.

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