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If you're looking for potential short squeeze candidates, this list might offer a good starting point.

In this screen, we identified stocks with excessive short interest.

In order to take a contrarian stance, we searched for companies with impressive profitability: trailing twelve month earnings before interest, taxes, depreciation and amortization (TTM EBITDA) / common equity at least 20% higher than the company’s 5-year average. Using common equity as the denominator gives a ratio that is more relevant to stockholders.

To rule out high interest payments that can put a wedge between EBITDA and the actual cash flows directed to stockholders, we also verified that TTM interest coverage ratio is at least 20% higher than the prior-year TTM ratio.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.



Do you think investors are being too bearish on these names? Use this list as a starting-off point for your own analysis.

List sorted by TTM EBITDA / common equity.

1. VirnetX Holding Corp (NYSEMKT:VHC): Internet Software & Services Industry. Market cap of $1.34B. Float short at 20.86%. TTM EBITDA/common equity at 4.24 vs. 5-year average at 2.53. TTM interest coverage ratio at 3.57 vs. prior-year TTM ratio at -3.64. The stock has gained 374.07% over the last year.



2. American International Group, Inc. (NYSE:AIG): Property & Casualty Insurance Industry. Market cap of $53.30B. Float short at 28.84%. TTM EBITDA/common equity at 0.68 vs. 5-year average at 0.36. TTM interest coverage ratio at 4.18 vs. prior-year TTM ratio at 2.37. The stock has lost 5% over the last year.



3. Coinstar Inc. (CSTR): Business Equipment Industry. Market cap of $1.50B. Float short at 41.02%. TTM EBITDA/common equity at 0.66 vs. 5-year average at 0.47. TTM interest coverage ratio at 4.65 vs. prior-year TTM ratio at 2.91. The stock is a short squeeze candidate, with a short float at 41.02% (equivalent to 11.35 days of average volume). It's been a rough couple of days for the stock, losing 8.34% over the last week.



4. Veeco Instruments Inc. (NASDAQ:VECO): Semiconductor Equipment & Materials Industry. Market cap of $2.12B. Float short at 29.29%. TTM EBITDA/common equity at 0.56 vs. 5-year average at 0.21. TTM interest coverage ratio at 54.49 vs. prior-year TTM ratio at 5.68. This is a risky stock that is significantly more volatile than the overall market (beta = 2.45). The stock is a short squeeze candidate, with a short float at 29.29% (equivalent to 10.42 days of average volume).

5. The Cheesecake Factory Incorporated (NASDAQ:CAKE): Restaurants Industry. Market cap of $1.74B. Float short at 17.21%. TTM EBITDA/common equity at 0.37 vs. 5-year average at 0.30. TTM interest coverage ratio at 8.58 vs. prior-year TTM ratio at 4.00. The stock is a short squeeze candidate, with a short float at 17.21% (equivalent to 9.4 days of average volume). The stock has gained 23.91% over the last year.

6. Dillard's Inc. (NYSE:DDS): Department Stores Industry. Market cap of $2.84B. Float short at 37.67%. TTM EBITDA/common equity at 0.31 vs. 5-year average at 0.18. TTM interest coverage ratio at 5.20 vs. prior-year TTM ratio at 2.99. This is a risky stock that is significantly more volatile than the overall market (beta = 2.55). The stock is a short squeeze candidate, with a short float at 37.67% (equivalent to 10.92 days of average volume).

7. Illumina Inc. (NASDAQ:ILMN): Biotechnology Industry. Market cap of $9.07B. Float short at 17.02%. TTM EBITDA/common equity at 0.29 vs. 5-year average at 0.09. TTM interest coverage ratio at 13.25 vs. prior-year TTM ratio at 9.43. The stock is a short squeeze candidate, with a short float at 17.02% (equivalent to 11.46 days of average volume). The stock has gained 67.67% over the last year.

8. Saks Incorporated (NYSE:SKS): Department Stores Industry. Market cap of $1.72B. Float short at 25.74%. TTM EBITDA/common equity at 0.20 vs. 5-year average at 0.11. TTM interest coverage ratio at 1.86 vs. prior-year TTM ratio at -0.20. This is a risky stock that is significantly more volatile than the overall market (beta = 2.63). The stock is a short squeeze candidate, with a short float at 25.74% (equivalent to 9.4 days of average volume). It's been a rough couple of days for the stock, losing 6.16% over the last week.

9. NuVasive, Inc. (NASDAQ:NUVA): Medical Instruments & Supplies Industry. Market cap of $1.30B. Float short at 15.9%. TTM EBITDA/common equity at 0.19 vs. 5-year average at 0.05. TTM interest coverage ratio at 5.61 vs. prior-year TTM ratio at 2.92. The stock is a short squeeze candidate, with a short float at 15.9% (equivalent to 9.38 days of average volume). The stock has lost 12.34% over the last year.

*EBITDA/equity and interest coverage ratios sourced from Screener.co, all other data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 9 Highly Shorted Stocks With Impressive Profitability