West (WSTC): Today's Weak 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 West ( WSTC) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified West as such a stock due to the following factors:

  • WSTC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $5.4 million.
  • WSTC has traded 1.5 million shares today.
  • WSTC is trading at 269.13 times the normal volume for the stock at this time of day.
  • WSTC is trading at a new low 6.02% 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.

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More details on WSTC:

West Corporation, together with its subsidiaries, provides technology-enabled communication services in the United States, Canada, Europe, the Middle East, Africa, the Asia-Pacific, Latin America, and South America. It operates in two segments, Unified Communications and Communication Services. The stock currently has a dividend yield of 2.9%. WSTC has a PE ratio of 19. Currently there are 5 analysts that rate West a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for West has been 253,800 shares per day over the past 30 days. West has a market cap of $2.6 billion and is part of the technology sector and telecommunications industry. The stock has a beta of 0.33 and a short float of 1.2% with 3.63 days to cover. Shares are down 2.9% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates West as a sell. Among the areas we feel are negative, one of the most important has been weak operating cash flow.

Highlights from the ratings report include:
  • Net operating cash flow has decreased to $53.12 million or 37.85% 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.
  • WEST CORP has improved earnings per share by 14.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, WEST CORP reported lower earnings of $1.52 versus $1.69 in the prior year. This year, the market expects an improvement in earnings ($3.06 versus $1.52).
  • The gross profit margin for WEST CORP is rather high; currently it is at 62.99%. Regardless of WSTC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, WSTC's net profit margin of 14.23% significantly outperformed against the industry.
  • The stock has risen over the past year at a faster pace than the S&P 500, reflecting the earnings growth of the company. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Commercial Services & Supplies industry. The net income increased by 73.9% when compared to the same quarter one year prior, rising from $46.28 million to $80.50 million.

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