Perilous Reversal Watch: WisdomTree Investments (WETF)

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

  • WETF has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $54.8 million.
  • WETF has traded 721,410 shares today.
  • WETF is down 3% today.
  • WETF was up 5.2% yesterday.

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More details on WETF:

WisdomTree Investments, Inc., through its subsidiaries, operates as an exchange-traded funds (ETFs) sponsor and asset manager. It offers ETFs in equities, currency, fixed income, and alternatives asset classes. The stock currently has a dividend yield of 1.6%. WETF has a PE ratio of 67. Currently there are 5 analysts that rate WisdomTree Investments a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for WisdomTree Investments has been 2.3 million shares per day over the past 30 days. WisdomTree Investments has a market cap of $2.8 billion and is part of the financial sector and financial services industry. The stock has a beta of 3.15 and a short float of 6.5% with 3.54 days to cover. Shares are up 38.8% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates WisdomTree Investments as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, good cash flow from operations, expanding profit margins and notable return on equity. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 5.8%. Since the same quarter one year prior, revenues rose by 40.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, WETF's share price has jumped by 110.00%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • WISDOMTREE INVESTMENTS 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, WISDOMTREE INVESTMENTS INC increased its bottom line by earning $0.45 versus $0.38 in the prior year. This year, the market expects an improvement in earnings ($0.64 versus $0.45).
  • Net operating cash flow has significantly increased by 79.53% to $16.94 million when compared to the same quarter last year. Despite an increase in cash flow of 79.53%, WISDOMTREE INVESTMENTS INC is still growing at a significantly lower rate than the industry average of 190.26%.
  • 35.74% is the gross profit margin for WISDOMTREE INVESTMENTS INC which we consider to be strong. Regardless of WETF'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 20.05% trails the industry average.

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