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.

Trade-Ideas LLC identified

American Railcar Industries

(

ARII

) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified American Railcar Industries as such a stock due to the following factors:

  • ARII has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $9.9 million.
  • ARII has traded 60,899 shares today.
  • ARII is trading at 8.14 times the normal volume for the stock at this time of day.
  • ARII is trading at a new low 10.04% 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 ARII:

American Railcar Industries, Inc. designs and manufactures hopper and tank railcars in North America. It operates through three segments: Manufacturing, Railcar Leasing, and Railcar Services. The stock currently has a dividend yield of 3.7%. ARII has a PE ratio of 8. Currently there are no analysts that rate American Railcar Industries a buy, 1 analyst rates it a sell, and 5 rate it a hold.

The average volume for American Railcar Industries has been 246,300 shares per day over the past 30 days. American Railcar has a market cap of $930.1 million and is part of the services sector and transportation industry. The stock has a beta of 2.01 and a short float of 21.2% with 8.19 days to cover. Shares are down 12.3% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates American Railcar Industries as a

buy

. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, compelling growth in net income, notable return on equity and attractive valuation levels. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 15.4%. Since the same quarter one year prior, revenues rose by 44.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • AMERICAN RAILCAR INDS INC 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. We feel that this trend should continue. During the past fiscal year, AMERICAN RAILCAR INDS INC increased its bottom line by earning $4.66 versus $4.07 in the prior year. This year, the market expects an improvement in earnings ($5.76 versus $4.66).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Machinery industry. The net income increased by 68.4% when compared to the same quarter one year prior, rising from $20.77 million to $34.98 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 Machinery industry and the overall market, AMERICAN RAILCAR INDS INC's return on equity exceeds that of both the industry average and the S&P 500.

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