Trade-Ideas: China Distance Education Holdings (DL) Is Today's Strong On High Relative 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 China Distance Education Holdings ( DL) as a strong on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified China Distance Education Holdings as such a stock due to the following factors:

  • DL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $3.7 million.
  • DL has traded 84,670 shares today.
  • DL is trading at 13.57 times the normal volume for the stock at this time of day.
  • DL is trading at a new high 3.06% above yesterday's close.

'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into 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. 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 DL:

China Distance Education Holdings Limited provides online and offline education services, and sells related products in the People's Republic of China. The stock currently has a dividend yield of 5%. DL has a PE ratio of 24. Currently there are 3 analysts that rate China Distance Education Holdings a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for China Distance Education Holdings has been 157,200 shares per day over the past 30 days. China Distance has a market cap of $570.1 million and is part of the services sector and diversified services industry. Shares are down 2.2% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates China Distance Education Holdings as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity and expanding profit margins. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 7.5%. Since the same quarter one year prior, revenues rose by 22.4%. 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.
  • DL's debt-to-equity ratio is very low at 0.22 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, DL has a quick ratio of 1.53, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. When compared to other companies in the Diversified Consumer Services industry and the overall market, CHINA DISTANCE EDUCATION-ADR's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • The gross profit margin for CHINA DISTANCE EDUCATION-ADR is rather high; currently it is at 50.04%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 5.48% is above that of the industry average.
  • The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Diversified Consumer Services industry average. The net income has decreased by 5.8% when compared to the same quarter one year ago, dropping from $1.30 million to $1.23 million.

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