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Today's Perilous Reversal Stock: Kellogg Company (K)

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

  • K has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $120.9 million.
  • K has traded 4.0 million shares today.
  • K is down 3.1% today.
  • K was up 6% yesterday.

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More details on K:

Kellogg Company, together with its subsidiaries, manufactures and markets ready-to-eat cereal and convenience food products primarily in the United States and the United Kingdom. The company operates through U.S. Morning Foods, U.S. Snacks, U.S. The stock currently has a dividend yield of 3%. K has a PE ratio of 12.5. Currently there are 2 analysts that rate Kellogg Company a buy, 3 analysts rate it a sell, and 10 rate it a hold.

The average volume for Kellogg Company has been 2.0 million shares per day over the past 30 days. Kellogg has a market cap of $22.5 billion and is part of the consumer goods sector and food & beverage industry. The stock has a beta of 0.55 and a short float of 3.6% with 5.50 days to cover. Shares are up 8.7% year-to-date as of the close of trading on Thursday.

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 Kellogg Company as a buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, notable return on equity, expanding profit margins, good cash flow from operations and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Food Products industry. The net income increased by 2656.3% when compared to the same quarter one year prior, rising from -$32.00 million to $818.00 million.
  • 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 Food Products industry and the overall market, KELLOGG CO's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for KELLOGG CO is rather high; currently it is at 61.53%. It has increased significantly from the same period last year. Along with this, the net profit margin of 23.36% significantly outperformed against the industry average.
  • Net operating cash flow has slightly increased to $418.00 million or 9.13% when compared to the same quarter last year. Despite an increase in cash flow, KELLOGG CO's cash flow growth rate is still lower than the industry average growth rate of 52.64%.
  • KELLOGG CO reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, KELLOGG CO increased its bottom line by earning $4.95 versus $2.68 in the prior year. For the next year, the market is expecting a contraction of 19.4% in earnings ($3.99 versus $4.95).

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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