Water-Logged And Getting Wetter: GrubHub (GRUB)

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 GrubHub ( GRUB) 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 GrubHub as such a stock due to the following factors:

  • GRUB has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $62.3 million.
  • GRUB has traded 4.0 million shares today.
  • GRUB traded in a range 229.1% of the normal price range with a price range of $2.45.
  • GRUB traded below its daily resistance level (quality: 182 days, meaning that the stock is crossing a resistance level set by the last 182 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 GRUB:

GrubHub Inc., together with its subsidiaries, provides an online and mobile platform for restaurant pick-up and delivery orders in the United States. The company connects approximately 30,000 local restaurants with diners in approximately 800 cities. GRUB has a PE ratio of 104. Currently there are 11 analysts that rate GrubHub a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for GrubHub has been 1.5 million shares per day over the past 30 days. GrubHub has a market cap of $3.1 billion and is part of the technology sector and internet industry. Shares are up 2.9% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates GrubHub as a hold. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, 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 company's return on equity has been disappointing.

Highlights from the ratings report include:
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust.
  • GRUB's very impressive revenue growth greatly exceeded the industry average of 5.8%. Since the same quarter one year prior, revenues leaped by 50.6%. 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 GRUBHUB INC is currently very high, coming in at 74.28%. 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 11.97% trails the industry average.
  • Net operating cash flow has slightly increased to $30.42 million or 9.29% when compared to the same quarter last year. Despite an increase in cash flow, GRUBHUB INC's cash flow growth rate is still lower than the industry average growth rate of 41.44%.
  • Compared to other companies in the Internet Software & Services industry and the overall market on the basis of return on equity, GRUBHUB INC underperformed against that of the industry average and is significantly less than that of the S&P 500.

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