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Trade-Ideas: Randgold Resources (GOLD) Is Today's "Water-Logged And Getting Wetter" 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 Randgold Resources ( GOLD) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Randgold Resources as such a stock due to the following factors:

  • GOLD has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $71.5 million.
  • GOLD has traded 1.4 million shares today.
  • GOLD traded in a range 214.8% of the normal price range with a price range of $6.00.
  • GOLD traded below its daily resistance level (quality: 4 days, meaning that the stock is crossing a resistance level set by the last 4 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in GOLD with the Ticky from Trade-Ideas. See the FREE profile for GOLD NOW at Trade-Ideas

More details on GOLD:

Randgold Resources Limited engages in the exploration and development of gold deposits in Sub-Saharan Africa. The stock currently has a dividend yield of 0.6%. GOLD has a PE ratio of 22.1. Currently there are 9 analysts that rate Randgold Resources a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Randgold Resources has been 1.0 million shares per day over the past 30 days. Randgold has a market cap of $7.5 billion and is part of the basic materials sector and metals & mining industry. Shares are down 18.4% year to date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Randgold Resources as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, weak operating cash flow and disappointing return on equity.

Highlights from the ratings report include:

  • GOLD's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, GOLD has a quick ratio of 2.16, which demonstrates the ability of the company to cover short-term liquidity needs.
  • 39.71% is the gross profit margin for RANDGOLD RESOURCES LTD which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, GOLD's net profit margin of 20.22% compares favorably to the industry average.
  • The revenue fell significantly faster than the industry average of 5.0%. Since the same quarter one year prior, revenues fell by 26.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Net operating cash flow has significantly decreased to $18.05 million or 88.57% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Metals & Mining industry. The net income has significantly decreased by 60.6% when compared to the same quarter one year ago, falling from $117.47 million to $46.30 million.

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