Strong On High Relative Volume: Renren (RENN)

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

  • RENN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $7.0 million.
  • RENN has traded 494,084 shares today.
  • RENN is trading at 2.45 times the normal volume for the stock at this time of day.
  • RENN is trading at a new high 4.01% above yesterday's close.

'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into 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. 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 RENN:

Renren Inc. operates a social networking Internet platform in the People's Republic of China. The company provides online advertising services; Internet value-added services (IVAS), including online talent show, VIP memberships, other IVAS, etc.; and online gaming services. RENN has a PE ratio of 24. Currently there are no analysts that rate Renren a buy, 1 analyst rates it a sell, and none rate it a hold.

The average volume for Renren has been 654,400 shares per day over the past 30 days. Renren has a market cap of $1.3 billion and is part of the technology sector and internet industry. Shares are up 59% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Renren as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including deteriorating net income and poor profit margins.

Highlights from the ratings report include:
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • RENN has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 16.25, which clearly demonstrates the ability to cover short-term cash needs.
  • RENREN INC -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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, RENREN INC -ADR turned its bottom line around by earning $0.12 versus -$0.12 in the prior year. For the next year, the market is expecting a contraction of 316.7% in earnings (-$0.26 versus $0.12).
  • The gross profit margin for RENREN INC -ADR is currently lower than what is desirable, coming in at 28.69%. It has decreased significantly from the same period last year. Despite the weak results of the gross profit margin, the net profit margin of 203.49% has significantly outperformed against the industry average.
  • 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 Internet Software & Services industry. The net income has significantly decreased by 65.3% when compared to the same quarter one year ago, falling from $100.83 million to $34.96 million.

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