Cheetah Mobile (CMCM) Is Today's Perilous Reversal 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 Cheetah Mobile ( CMCM) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Cheetah Mobile as such a stock due to the following factors:

  • CMCM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $38.6 million.
  • CMCM has traded 132,872 shares today.
  • CMCM is down 3.2% today.
  • CMCM was up 5.8% yesterday.

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More details on CMCM:

Cheetah Mobile Inc. operates a platform that offer mobile and PC applications for users and global content distribution channels for business partners in China. CMCM has a PE ratio of 111. Currently there are 4 analysts that rate Cheetah Mobile a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Cheetah Mobile has been 1.4 million shares per day over the past 30 days. Cheetah Mobile has a market cap of $4.6 billion and is part of the technology sector and computer software & services industry. Shares are up 125.5% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Cheetah Mobile as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, robust revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we find that the stock itself is trading at a premium valuation.

Highlights from the ratings report include:
  • Powered by its strong earnings growth of 50.00% and other important driving factors, this stock has surged by 56.27% over the past year, outperforming the rise in the S&P 500 Index during the same period.
  • CMCM's very impressive revenue growth greatly exceeded the industry average of 5.0%. Since the same quarter one year prior, revenues leaped by 113.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The gross profit margin for CHEETAH MOBILE INC -ADR is currently very high, coming in at 78.40%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, CMCM's net profit margin of 4.56% significantly trails the industry average.
  • Compared to other companies in the Software industry and the overall market on the basis of return on equity, CHEETAH MOBILE INC -ADR underperformed against that of the industry average and is significantly less than that of the S&P 500.

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