SFX Entertainment (SFXE) Is Today's Strong 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 SFX Entertainment ( SFXE) as a strong on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified SFX Entertainment as such a stock due to the following factors:

  • SFXE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $4.1 million.
  • SFXE has traded 159,169 shares today.
  • SFXE is trading at 4.05 times the normal volume for the stock at this time of day.
  • SFXE is trading at a new high 4.06% 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 SFXE:

SFX Entertainment, Inc. engages in the production of live events and digital entertainment content that focuses on the electronic music culture (EMC) and other festivals. Currently there are 2 analysts that rate SFX Entertainment a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for SFX Entertainment has been 600,000 shares per day over the past 30 days. SFX Entertainment has a market cap of $449.8 million and is part of the services sector and leisure industry. Shares are up 6.4% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates SFX Entertainment as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, weak operating cash flow, poor profit margins, generally disappointing historical performance in the stock itself and generally high debt management risk.

Highlights from the ratings report include:
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Media industry and the overall market, SFX ENTERTAINMENT INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to -$10.58 million or 31.76% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • The gross profit margin for SFX ENTERTAINMENT INC is currently lower than what is desirable, coming in at 34.54%. Regardless of SFXE's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, SFXE's net profit margin of -79.59% significantly underperformed when compared to the industry average.
  • Despite the current debt-to-equity ratio of 1.52, it is still below the industry average, suggesting that this level of debt is acceptable within the Media industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.40 is very low and demonstrates very weak liquidity.
  • SFXE's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 38.64%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.

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