Today's Weak On High Volume Stock: Restoration Hardware Holdings (RH)

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

  • RH has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $90.7 million.
  • RH has traded 178,612 shares today.
  • RH is trading at 3.67 times the normal volume for the stock at this time of day.
  • RH is trading at a new low 4.01% 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.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in RH with the Ticky from Trade-Ideas. See the FREE profile for RH NOW at Trade-Ideas

More details on RH:

Restoration Hardware Holdings, Inc., together with its subsidiaries, engages in the retail of home furnishings. Its product categories include furniture, lighting, textiles, bathware, decor, outdoor and garden, tableware, and children's furnishings. RH has a PE ratio of 41. Currently there are 9 analysts that rate Restoration Hardware Holdings a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Restoration Hardware Holdings has been 701,400 shares per day over the past 30 days. Restoration Hardware has a market cap of $3.8 billion and is part of the services sector and retail industry. The stock has a beta of 0.64 and a short float of 28.7% with 9.28 days to cover. Shares are up 0.2% year-to-date as of the close of trading on Friday.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Restoration Hardware Holdings as a hold. 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 and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.

Highlights from the ratings report include:
  • RH's revenue growth has slightly outpaced the industry average of 9.1%. Since the same quarter one year prior, revenues rose by 15.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.64, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels.
  • 36.64% is the gross profit margin for RESTORATION HARDWARE HLDNGS which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 1.69% trails the industry average.
  • Powered by its strong earnings growth of 325.00% and other important driving factors, this stock has surged by 32.90% over the past year, outperforming the rise in the S&P 500 Index during the same period. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to the other companies in the Specialty Retail industry and the overall market, RESTORATION HARDWARE HLDNGS's return on equity is significantly below that of the industry average and is below that of the S&P 500.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

More from Markets

Apple and GE Switch Roles; Musk's Super Control of Tesla Explained -- ICYMI

Apple and GE Switch Roles; Musk's Super Control of Tesla Explained -- ICYMI

Trump May Be More to Blame For Higher Oil Prices Than OPEC

Trump May Be More to Blame For Higher Oil Prices Than OPEC

Dow Falls Over 200 Points as Apple's Slump Offsets Gains in General Electric

Dow Falls Over 200 Points as Apple's Slump Offsets Gains in General Electric

Week Ahead: Major Earnings on Tap as Wall Street Readies for Geopolitical Moves

Week Ahead: Major Earnings on Tap as Wall Street Readies for Geopolitical Moves

3 Hot Reads From TheStreet's Top Premium Columnists

3 Hot Reads From TheStreet's Top Premium Columnists