Mattress Firm (MFRM): Today's Weak On High Volume Stock

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

  • MFRM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $23.1 million.
  • MFRM has traded 223,638 shares today.
  • MFRM is trading at 31.73 times the normal volume for the stock at this time of day.
  • MFRM is trading at a new low 6.02% 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 MFRM:

Mattress Firm Holding Corp., through its subsidiaries, operates as a specialty retailer of mattresses, and related products and accessories in the United States. It operates in two segments, Retail Operations and Franchise Operations. The company also operates an e-commerce Website. MFRM has a PE ratio of 47. Currently there are 5 analysts that rate Mattress Firm a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Mattress Firm has been 303,200 shares per day over the past 30 days. Mattress Firm has a market cap of $2.1 billion and is part of the services sector and specialty retail industry. The stock has a beta of 0.71 and a short float of 24.8% with 11.77 days to cover. Shares are up 6.2% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Mattress Firm as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and expanding profit margins. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • MFRM's very impressive revenue growth greatly exceeded the industry average of 9.1%. Since the same quarter one year prior, revenues leaped by 91.3%. 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, MFRM's share price has jumped by 28.91%, 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.
  • 39.50% is the gross profit margin for MATTRESS FIRM HOLDING CORP which we consider to be strong. Regardless of MFRM'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 1.10% trails the industry average.
  • MATTRESS FIRM HOLDING CORP's earnings per share declined by 24.0% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, MATTRESS FIRM HOLDING CORP reported lower earnings of $1.27 versus $1.54 in the prior year. This year, the market expects an improvement in earnings ($2.63 versus $1.27).
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Specialty Retail industry average. The net income has decreased by 23.5% when compared to the same quarter one year ago, dropping from $8.66 million to $6.62 million.

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