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Trade-Ideas: Alpha Natural Resources (ANR) Is Today's "Dead Cat Bounce" 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 Alpha Natural Resources ( ANR) as a "dead cat bounce" (down big yesterday but up big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Alpha Natural Resources as such a stock due to the following factors:

  • ANR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $63.8 million.
  • ANR has traded 109,679 shares today.
  • ANR is up 3.1% today.
  • ANR was down 6.2% yesterday.

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More details on ANR:

Alpha Natural Resources, Inc., together with its subsidiaries, engages in extracting, processing, and marketing steam and metallurgical coal in Virginia, West Virginia, Kentucky, Pennsylvania, and Wyoming. Currently there are 6 analysts that rate Alpha Natural Resources a buy, 4 analysts rate it a sell, and 9 rate it a hold.

The average volume for Alpha Natural Resources has been 10.8 million shares per day over the past 30 days. Alpha Natural has a market cap of $1.5 billion and is part of the basic materials sector and metals & mining industry. The stock has a beta of 2.36 and a short float of 22% with 4.87 days to cover. Shares are down 36.1% 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 Alpha Natural Resources 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 ALPHA NATURAL RESOURCES INC is currently extremely low, coming in at 6.42%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -13.90% is significantly below that of the industry average.
  • ANR has underperformed the S&P 500 Index, declining 21.54% from its price level of one year ago. 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.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ALPHA NATURAL RESOURCES INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • ANR, with its decline in revenue, underperformed when compared the industry average of 6.4%. Since the same quarter one year prior, revenues fell by 27.8%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • ANR's debt-to-equity ratio of 0.72 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.94 is weak.

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