Weak On High Volume: CarMax (KMX)
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
(
) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified CarMax as such a stock due to the following factors:
- KMX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $61.8 million.
- KMX has traded 130,127 shares today.
- KMX is trading at 2.47 times the normal volume for the stock at this time of day.
- KMX is trading at a new low 3.04% 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 KMX:
CarMax, Inc., through its subsidiaries, operates as a retailer of used vehicles in the United States. It operates in two segments, CarMax Sales Operations and CarMax Auto Finance. KMX has a PE ratio of 27.2. Currently there are 7 analysts that rate CarMax a buy, no analysts rate it a sell, and 4 rate it a hold.
The average volume for CarMax has been 1.6 million shares per day over the past 30 days. CarMax has a market cap of $14.2 billion and is part of the services sector and specialty retail industry. The stock has a beta of 1.10 and a short float of 7.1% with 14.77 days to cover. Shares are up 1.2% year-to-date as of the close of trading on Tuesday.
Analysis:
rates CarMax as a
. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, growth in earnings per share, increase in net income and notable return on equity. 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:
- KMX's revenue growth has slightly outpaced the industry average of 13.5%. Since the same quarter one year prior, revenues rose by 15.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 27.65% and other important driving factors, this stock has surged by 40.25% over the past year, outperforming the rise in the S&P 500 Index during the same period. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
- CARMAX INC has improved earnings per share by 27.6% 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. We feel that this trend should continue. During the past fiscal year, CARMAX INC increased its bottom line by earning $2.17 versus $1.87 in the prior year. This year, the market expects an improvement in earnings ($2.60 versus $2.17).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Specialty Retail industry average. The net income increased by 22.2% when compared to the same quarter one year prior, going from $106.45 million to $130.05 million.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Specialty Retail industry and the overall market on the basis of return on equity, CARMAX INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- You can view the full CarMax Ratings Report.
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