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

  • OCLR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $2.9 million.
  • OCLR has traded 287,887 shares today.
  • OCLR is trading at 2.13 times the normal volume for the stock at this time of day.
  • OCLR is trading at a new low 5.38% 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 OCLR:

Oclaro, Inc. designs, manufactures, and markets lasers and optical components, modules, and subsystems for the optical communications, industrial, and consumer laser markets worldwide. The company's products generate, detect, combine, and separate light signals in telecom networks. Currently there is 1 analyst that rates Oclaro a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Oclaro has been 1.1 million shares per day over the past 30 days. Oclaro has a market cap of $295.4 million and is part of the technology sector and electronics industry. The stock has a beta of 2.53 and a short float of 12.5% with 9.90 days to cover. Shares are up 51.1% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Oclaro as a sell. Among the areas we feel are negative, one of the most important has been poor profit margins.

Highlights from the ratings report include:
  • The gross profit margin for OCLARO INC is rather low; currently it is at 20.37%. Regardless of OCLR's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, OCLR's net profit margin of -12.26% significantly underperformed when compared to 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 Communications Equipment industry and the overall market, OCLARO INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • OCLR, with its decline in revenue, underperformed when compared the industry average of 0.2%. Since the same quarter one year prior, revenues fell by 13.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • Despite currently having a low debt-to-equity ratio of 0.42, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that OCLR's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.10 is high and demonstrates strong liquidity.
  • Looking at where the stock is today compared to one year ago, we find that it is higher, and it has outperformed the rise in the S&P 500 over the same period. 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.

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