NeoPhotonics (NPTN) Weak On High Volume

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

  • NPTN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $8.4 million.
  • NPTN has traded 129,249 shares today.
  • NPTN is trading at 2.18 times the normal volume for the stock at this time of day.
  • NPTN is trading at a new low 3.04% 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 NPTN:

NeoPhotonics Corporation designs and manufactures hybrid photonic integrated optoelectronic modules and subsystems for bandwidth-intensive, high-speed communications networks. Currently there are 5 analysts that rate NeoPhotonics a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for NeoPhotonics has been 577,800 shares per day over the past 30 days. NeoPhotonics has a market cap of $352.0 million and is part of the technology sector and electronics industry. The stock has a beta of 0.08 and a short float of 4.7% with 1.26 days to cover. Shares are up 210.9% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates NeoPhotonics as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. 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:
  • The revenue growth came in higher than the industry average of 0.7%. Since the same quarter one year prior, revenues rose by 19.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.41, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.35, which illustrates the ability to avoid short-term cash problems.
  • 36.18% is the gross profit margin for NEOPHOTONICS CORP which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, NPTN's net profit margin of 0.12% significantly trails the industry average.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, NEOPHOTONICS CORP's return on equity significantly trails that of both the industry average and the S&P 500.

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