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

  • TROX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $19.1 million.
  • TROX has traded 888,664 shares today.
  • TROX is down 4% today.
  • TROX was up 9.1% yesterday.

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More details on TROX:

Tronox Limited produces and markets titanium ore and titanium dioxide in the Americas, Europe, and the Asia-Pacific. It offers titanium dioxide pigment, which is used in consumer products, such as paint, plastic, and certain specialty products. The stock currently has a dividend yield of 4.2%. Currently there is 1 analyst that rates Tronox a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Tronox has been 571,200 shares per day over the past 30 days. Tronox has a market cap of $1.5 billion and is part of the basic materials sector and chemicals industry. The stock has a beta of 3.39 and a short float of 9.7% with 7.88 days to cover. Shares are up 29.4% year to date as of the close of trading on Friday.

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 Tronox as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, poor profit margins, generally high debt management risk and generally disappointing historical performance in the stock itself.

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 Chemicals industry. The net income has significantly decreased by 101.1% when compared to the same quarter one year ago, falling from $1,144.00 million to -$13.00 million.
  • 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 Chemicals industry and the overall market, TRONOX LTD's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for TRONOX LTD is rather low; currently it is at 23.05%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -2.47% is significantly below that of the industry average.
  • The debt-to-equity ratio of 1.01 is relatively high when compared with the industry average, suggesting a need for better debt level management. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 5.40, which shows the ability to cover short-term cash needs.
  • The share price of TRONOX LTD has not done very well: it is down 6.68% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.

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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