Today's Weak On High Volume Stock: E-Commerce China Dangdang (DANG)

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

  • DANG has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $34.2 million.
  • DANG has traded 455,135 shares today.
  • DANG is trading at 2.31 times the normal volume for the stock at this time of day.
  • DANG is trading at a new low 5.11% 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 DANG:

E-Commerce China Dangdang Inc. operates as a business-to-consumer e-commerce company in the People's Republic of China. It primarily sells books, periodicals, electronic publications, consumer electronics, and audio-visual products through its Website dangdang.com. Currently there is 1 analyst that rates E-Commerce China Dangdang a buy, 1 analyst rates it a sell, and 5 rate it a hold.

The average volume for E-Commerce China Dangdang has been 1.9 million shares per day over the past 30 days. E-Commerce China Dangdang has a market cap of $842.1 million and is part of the services sector and retail industry. Shares are up 9.6% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates E-Commerce China Dangdang as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • DANG's revenue growth has slightly outpaced the industry average of 18.8%. Since the same quarter one year prior, revenues rose by 28.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • DANG has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.43 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • 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 Internet & Catalog Retail industry and the overall market on the basis of return on equity, E-COMMERCE CH DANGDANG -ADR underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet & Catalog Retail industry. The net income has significantly decreased by 3191.1% when compared to the same quarter one year ago, falling from $0.31 million to -$9.71 million.
  • The gross profit margin for E-COMMERCE CH DANGDANG -ADR is rather low; currently it is at 16.20%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -2.71% trails that of the industry average.

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