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

  • KMT has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $27.4 million.
  • KMT has traded 524,280 shares today.
  • KMT is down 3% today.
  • KMT was up 5.2% yesterday.

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More details on KMT: Kennametal Inc. manufactures and supplies tooling, engineered components, and advanced materials consumed in production processes worldwide. It operates through two segments, Industrial and Infrastructure. The stock currently has a dividend yield of 3.4%. Currently there are 4 analysts that rate Kennametal a buy, 1 analyst rates it a sell, and 5 rate it a hold. The average volume for Kennametal has been 1.2 million shares per day over the past 30 days. Kennametal has a market cap of $1.9 billion and is part of the industrial goods sector and industrial industry. The stock has a beta of 1.96 and a short float of 4% with 2.51 days to cover. Shares are up 29.9% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Kennametal as a

sell

. The company's weaknesses can be seen in multiple areas, such as its poor profit margins, weak operating cash flow and generally disappointing historical performance in the stock itself. Highlights from the ratings report include:

  • The gross profit margin for KENNAMETAL INC is currently lower than what is desirable, coming in at 31.01%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.21% trails that of the industry average.
  • Net operating cash flow has significantly decreased to $40.87 million or 51.49% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • KMT's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 32.76%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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.
  • 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 Machinery industry and the overall market, KENNAMETAL INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • KMT, with its decline in revenue, slightly underperformed the industry average of 14.4%. Since the same quarter one year prior, revenues fell by 22.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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