Today's Dead Cat Bounce Stock: Santander Consumer USA Holdings (SC)

Trade-Ideas LLC identified Santander Consumer USA Holdings (SC) as a "dead cat bounce" (down big yesterday but up big today) candidate
By TheStreet Wire ,

Trade-Ideas LLC identified

Santander Consumer USA Holdings

(

SC

) as a "dead cat bounce" (down big yesterday but up big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Santander Consumer USA Holdings as such a stock due to the following factors:

  • SC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $28.4 million.
  • SC has traded 1.1 million shares today.
  • SC is up 3.2% today.
  • SC was down 6.9% yesterday.

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More details on SC:

Santander Consumer USA Holdings Inc., a specialized consumer finance company, provides vehicle finance and third-party servicing in the United States. The company's vehicle finance products and services include retail installment contracts, vehicle leases, and dealer loans. SC has a PE ratio of 5. Currently there are 3 analysts that rate Santander Consumer USA Holdings a buy, 1 analyst rates it a sell, and 6 rate it a hold.

The average volume for Santander Consumer USA Holdings has been 2.1 million shares per day over the past 30 days. Santander Consumer USA has a market cap of $3.8 billion and is part of the financial sector and real estate industry. Shares are down 37.5% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Santander Consumer USA Holdings as a

sell

. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, weak operating cash flow, disappointing return on equity 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 underperformed when compared to that of the S&P 500 and the Consumer Finance industry average. The net income has decreased by 18.5% when compared to the same quarter one year ago, dropping from $246.28 million to $200.69 million.
  • The debt-to-equity ratio is very high at 6.86 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
  • Net operating cash flow has decreased to $654.39 million or 47.36% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Consumer Finance industry and the overall market on the basis of return on equity, SANTANDER CONSUMER USA HLDGS has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • Looking at the price performance of SC's shares over the past 12 months, there is not much good news to report: the stock is down 59.61%, 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. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.

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