Trade-Ideas: Kellogg (K) Is Today's Weak On High Relative Volume Stock

Trade-Ideas LLC identified Kellogg (K) as a weak on high relative volume candidate
By TheStreet Wire ,

Trade-Ideas LLC identified

Kellogg

(

K

) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Kellogg 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 $106.8 million.
  • K has traded 374,074 shares today.
  • K is trading at 5.30 times the normal volume for the stock at this time of day.
  • K is trading at a new low 4.01% below yesterday's close.

'Weak on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as material stock news, analyst downgrades, insider selling, selling from 'superinvestors,' or that hedge funds and traders are piling out of a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize (or avoid losses by trimming weak positions). In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on K:

Kellogg Company, together with its subsidiaries, manufactures and markets ready-to-eat cereal and convenience foods. The company operates through U.S. Morning Foods, U.S. Snacks, U.S. Specialty, North America Other, Europe, Latin America, and Asia Pacific segments. The stock currently has a dividend yield of 2.8%. K has a PE ratio of 66. Currently there is 1 analyst that rates Kellogg a buy, 4 analysts rate it a sell, and 8 rate it a hold.

The average volume for Kellogg has been 1.9 million shares per day over the past 30 days. Kellogg has a market cap of $24.9 billion and is part of the consumer goods sector and food & beverage industry. The stock has a beta of 0.62 and a short float of 3.1% with 4.99 days to cover. Shares are up 7.9% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Kellogg as a

buy

. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • Net operating cash flow has increased to $446.00 million or 15.54% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 2.76%.
  • 44.23% is the gross profit margin for KELLOGG CO which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, K's net profit margin of 6.37% significantly trails the industry average.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 9.3%. Since the same quarter one year prior, revenues slightly dropped by 5.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • KELLOGG CO's earnings per share declined by 23.2% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, KELLOGG CO reported lower earnings of $1.74 versus $4.95 in the prior year. This year, the market expects an improvement in earnings ($3.52 versus $1.74).
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

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