SemiLEDs (LEDS) Showing Signs Of Perilous Reversal Today

Trade-Ideas LLC identified SemiLEDs ( LEDS) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified SemiLEDs as such a stock due to the following factors:

  • LEDS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $13.8 million.
  • LEDS has traded 61,555 shares today.
  • LEDS is down 8.5% today.
  • LEDS was up 207.7% yesterday.

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More details on LEDS:

SemiLEDs Corporation develops, manufactures, and sells light emitting diode (LED) chips and LED components.

The average volume for SemiLEDs has been 20,800 shares per day over the past 30 days. SemiLEDs has a market cap of $6.1 million and is part of the technology sector and electronics industry. The stock has a beta of 0.66 and a short float of 2% with 0.02 days to cover. Shares are down 10.8% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates SemiLEDs as a sell. The company's weaknesses can be seen in multiple areas, such as its poor profit margins and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • The gross profit margin for SEMILEDS CORP is rather low; currently it is at 16.80%. Regardless of LEDS's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, LEDS's net profit margin of -87.07% significantly underperformed when compared to the industry average.
  • LEDS's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 67.02%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • 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. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, SEMILEDS CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The revenue fell significantly faster than the industry average of 5.8%. Since the same quarter one year prior, revenues fell by 36.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • LEDS's debt-to-equity ratio is very low at 0.14 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.17, which illustrates the ability to avoid short-term cash problems.

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