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Trade-Ideas: Walter Energy (WLT) Is Today's "Perilous Reversal" 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 or Stephanie Link.

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

  • WLT has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $134.8 million.
  • WLT has traded 9.6 million shares today.
  • WLT is down 3.4% today.
  • WLT was up 6.3% yesterday.

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More details on WLT:

Walter Energy, Inc. produces and exports metallurgical coal for the steel industry. It also produces thermal and industrial coal, anthracite, metallurgical coke, coal bed methane gas, and other related products. The stock currently has a dividend yield of 0.3%. Currently there are 5 analysts that rate Walter Energy a buy, 2 analysts rate it a sell, and 10 rate it a hold.

The average volume for Walter Energy has been 10.0 million shares per day over the past 30 days. Walter Energy has a market cap of $795.3 million and is part of the basic materials sector and metals & mining industry. The stock has a beta of 2.26 and a short float of 46.4% with 2.56 days to cover. Shares are down 64.6% year to date as of the close of trading on Monday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Walter Energy as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, poor profit margins and weak operating cash flow.

Highlights from the ratings report include:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Metals & Mining industry. The net income has significantly decreased by 208.0% when compared to the same quarter one year ago, falling from $31.94 million to -$34.49 million.
  • The debt-to-equity ratio is very high at 2.87 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, WLT maintains a poor quick ratio of 0.84, which illustrates the inability to avoid short-term cash problems.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Metals & Mining industry and the overall market, WALTER ENERGY INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for WALTER ENERGY INC is currently extremely low, coming in at 13.40%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -7.81% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$4.70 million or 101.97% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

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