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Sociedad Quimica Y Minera De Chile (SQM) 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 Sociedad Quimica Y Minera De Chile ( SQM) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Sociedad Quimica Y Minera De Chile as such a stock due to the following factors:

  • SQM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $18.1 million.
  • SQM has traded 563,598 shares today.
  • SQM is down 3% today.
  • SQM was up 7.4% yesterday.

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More details on SQM:

Chemical and Mining Company of Chile Inc. engages in the production and distribution of specialty plant nutrients, iodine and its derivatives, lithium and its derivatives, potassium chloride and potassium sulfate, industrial chemicals, and other commodity fertilizers. The stock currently has a dividend yield of 3.1%. SQM has a PE ratio of 10.7. Currently there is 1 analyst that rates Sociedad Quimica Y Minera De Chile a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for Sociedad Quimica Y Minera De Chile has been 697,100 shares per day over the past 30 days. Sociedad Quimica Y Minera De Chile has a market cap of $7.0 billion and is part of the basic materials sector and chemicals industry. Shares are up 10% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Sociedad Quimica Y Minera De Chile as a hold. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.

Highlights from the ratings report include:

  • Net operating cash flow has slightly increased to $179.68 million or 6.53% when compared to the same quarter last year. In addition, SOC QUIMICA Y MINERA DE CHI has also modestly surpassed the industry average cash flow growth rate of 1.29%.
  • 39.06% is the gross profit margin for SOC QUIMICA Y MINERA DE CHI 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, SQM's net profit margin of 26.65% significantly outperformed against the industry.
  • SQM's debt-to-equity ratio of 0.79 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. Despite the fact that SQM's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.66 is high and demonstrates strong liquidity.
  • Looking at the price performance of SQM's shares over the past 12 months, there is not much good news to report: the stock is down 56.31%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • 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 decreased by 15.9% when compared to the same quarter one year ago, dropping from $165.18 million to $138.91 million.

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