Water-Logged And Getting Wetter Stock Of The Day: IGate (IGTE)

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 iGate ( IGTE) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified iGate as such a stock due to the following factors:

  • IGTE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $60.2 million.
  • IGTE has traded 560,824 shares today.
  • IGTE traded in a range 221.9% of the normal price range with a price range of $0.21.
  • IGTE traded below its daily resistance level (quality: 2 days, meaning that the stock is crossing a resistance level set by the last 2 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on IGTE:

iGATE Corporation, through its subsidiaries, provides information technology (IT) and IT-enabled operations offshore outsourcing solutions and services to large and medium-size organizations. IGTE has a PE ratio of 298. Currently there are 3 analysts that rate iGate a buy, no analysts rate it a sell, and 8 rate it a hold.

The average volume for iGate has been 1.2 million shares per day over the past 30 days. iGate has a market cap of $3.9 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 2.49 and a short float of 3.2% with 0.67 days to cover. Shares are up 20.9% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates iGate as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 22.5%. Since the same quarter one year prior, revenues slightly increased by 6.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the IT Services industry. The net income increased by 20.3% when compared to the same quarter one year prior, going from $31.62 million to $38.02 million.
  • Even though the current debt-to-equity ratio is 1.18, it is still below the industry average, suggesting that this level of debt is acceptable within the IT Services industry. Despite the fact that IGTE's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.77 is high and demonstrates strong liquidity.
  • 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 IT Services industry and the overall market, IGATE CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to $0.35 million or 97.98% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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