Weak On High Volume: Groupon (GRPN)

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

  • GRPN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $33.2 million.
  • GRPN has traded 6.4 million shares today.
  • GRPN is trading at 2.69 times the normal volume for the stock at this time of day.
  • GRPN is trading at a new low 4.14% 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 GRPN:

Groupon, Inc. operates online local commerce marketplaces that connect merchants to consumers by offering goods and services at a discount worldwide. It also offers deals on products for which it acts as the merchant of record. Currently there are 7 analysts that rate Groupon a buy, no analysts rate it a sell, and 11 rate it a hold.

The average volume for Groupon has been 8.6 million shares per day over the past 30 days. Groupon has a market cap of $4.3 billion and is part of the technology sector and internet industry. The stock has a beta of 1.01 and a short float of 16% with 12.14 days to cover. Shares are down 22.8% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Groupon as a hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and revenue growth. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.

Highlights from the ratings report include:
  • GROUPON INC has improved earnings per share by 25.0% 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, GROUPON INC continued to lose money by earning -$0.09 versus -$0.14 in the prior year. This year, the market expects an improvement in earnings ($0.17 versus -$0.09).
  • 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 62.2% when compared to the same quarter one year prior, rising from -$37.80 million to -$14.27 million.
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. 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.
  • The gross profit margin for GROUPON INC is rather high; currently it is at 50.59%. Regardless of GRPN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -1.90% trails the industry average.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Internet & Catalog Retail industry and the overall market, GROUPON INC's return on equity significantly trails that of both the industry average and the S&P 500.

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