Trade-Ideas: Web.com Group (WWWW) 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 Web.com Group ( WWWW) as a strong on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Web.com Group as such a stock due to the following factors:

  • WWWW has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $9.9 million.
  • WWWW has traded 229,914 shares today.
  • WWWW is trading at 12.18 times the normal volume for the stock at this time of day.
  • WWWW is trading at a new high 11.22% 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 WWWW:

Web.com Group, Inc. provides Internet services to small businesses in North America, South America, and the United Kingdom. The company offers a range of Web services and products that enable small businesses to establish, maintain, promote, and optimize their online presence. Currently there are 6 analysts that rate Web.com Group a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Web.com Group has been 511,200 shares per day over the past 30 days. Web.com Group has a market cap of $1.2 billion and is part of the technology sector and internet industry. The stock has a beta of 0.18 and a short float of 6.5% with 5.81 days to cover. Shares are up 21.5% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Web.com Group as a hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • WEB.COM GROUP INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, WEB.COM GROUP INC continued to lose money by earning -$0.25 versus -$1.36 in the prior year. This year, the market expects an improvement in earnings ($2.38 versus -$0.25).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Internet Software & Services industry. The net income increased by 377.3% when compared to the same quarter one year prior, rising from $0.49 million to $2.34 million.
  • The gross profit margin for WEB.COM GROUP INC is rather high; currently it is at 63.27%. Regardless of WWWW's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, WWWW's net profit margin of 1.76% is significantly lower than the industry average.
  • WWWW has underperformed the S&P 500 Index, declining 11.34% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The debt-to-equity ratio is very high at 2.99 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.13, which clearly demonstrates the inability to cover short-term cash needs.

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