NQ Mobile (NQ) Showing Signs Of Perilous Reversal Today

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 NQ Mobile ( NQ) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified NQ Mobile as such a stock due to the following factors:

  • NQ has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $12.7 million.
  • NQ has traded 496,757 shares today.
  • NQ is down 4.6% today.
  • NQ was up 15.4% yesterday.

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More details on NQ:

NQ Mobile Inc. provides mobile Internet services in the People's Republic of China and internationally. The company provides products and services in the areas of mobile security, privacy, productivity, personalized cloud, and family protection. NQ has a PE ratio of 25.

The average volume for NQ Mobile has been 1.3 million shares per day over the past 30 days. NQ Mobile has a market cap of $393.5 million and is part of the technology sector and computer software & services industry. Shares are up 34% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates NQ Mobile as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Software industry and the overall market, NQ MOBILE INC -ADR's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for NQ MOBILE INC -ADR is rather low; currently it is at 21.04%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -19.11% is significantly below that of the industry average.
  • NQ's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 43.68%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • NQ MOBILE INC -ADR has improved earnings per share by 44.1% in the most recent quarter compared to 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, NQ MOBILE INC -ADR reported poor results of -$0.98 versus -$0.04 in the prior year. This year, the market expects an improvement in earnings ($0.32 versus -$0.98).
  • Despite currently having a low debt-to-equity ratio of 0.36, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 3.63 is very high and demonstrates very strong liquidity.

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