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

  • VG has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $6.7 million.
  • VG has traded 287,761 shares today.
  • VG is trading at 2.99 times the normal volume for the stock at this time of day.
  • VG is trading at a new low 3.09% 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 VG:

Vonage Holdings Corp. provides unified communications as a service solutions connecting people through cloud-connected devices worldwide. VG has a PE ratio of 45. Currently there are 5 analysts that rate Vonage Holdings a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Vonage Holdings has been 1.1 million shares per day over the past 30 days. Vonage has a market cap of $1.1 billion and is part of the technology sector and telecommunications industry. The stock has a beta of -0.15 and a short float of 4.6% with 6.61 days to cover. Shares are up 31.5% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Vonage Holdings as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. 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 net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Diversified Telecommunication Services industry. The net income increased by 62.8% when compared to the same quarter one year prior, rising from $4.59 million to $7.47 million.
  • Net operating cash flow has increased to $10.72 million or 14.24% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -0.65%.
  • The current debt-to-equity ratio, 0.52, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that VG's debt-to-equity ratio is low, the quick ratio, which is currently 0.50, displays a potential problem in covering short-term cash needs.
  • The gross profit margin for VONAGE HOLDINGS CORP is rather high; currently it is at 67.67%. Regardless of VG's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 3.39% trails the industry average.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Diversified Telecommunication Services industry and the overall market, VONAGE HOLDINGS CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.

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