Trade-Ideas: 2U (TWOU) Is Today's Strong On High Relative 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 2U ( TWOU) as a strong on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified 2U as such a stock due to the following factors:

  • TWOU has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $7.5 million
  • TWOU has traded 172,525 shares today
  • TWOU is trading at 2.56 times the normal volume for the stock at this time of day
  • TWOU is trading at a new high 5.00327236907360006767930826754309237003326416015625 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 TWOU:

2U, Inc. provides cloud-based software-as-a-service (SaaS) solutions for nonprofit colleges and universities to deliver education to qualified students. Currently there are five analysts that rate 2U a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for 2U has been 282,000 shares per day over the past 30 days. 2U has a market cap of $1.23 billion and is part of the technology sector and computer software & services industry. Shares are up 55.5% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates 2U 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 significantly decreased to -$1.29 million or 152.02% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Compared to other companies in the Diversified Consumer Services industry and the overall market, 2U INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for 2U INC is currently very high, coming in at 79.92%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -15.79% is in-line with the industry average.
  • TWOU 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. Along with this, the company maintains a quick ratio of 2.87, which clearly demonstrates the ability to cover short-term cash needs.
  • This stock has increased by 112.15% over the past year, outperforming the rise in the S&P 500 Index during the same period. Despite the fact that the stock's value has already enjoyed nice gains in the past year, we feel that the risks surrounding an investment in this stock outweigh any potential future returns.

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