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

Kennametal

(

KMT

) as a weak on high relative volume 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 $29.0 million.
  • KMT has traded 114,568 shares today.
  • KMT is trading at 4.89 times the normal volume for the stock at this time of day.
  • KMT is trading at a new low 3.05% 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 KMT:

Kennametal Inc. manufactures and supplies tooling, engineered components, and advanced materials consumed in production processes worldwide. The company operates in two segments, Industrial and Infrastructure. The stock currently has a dividend yield of 2.2%. KMT has a PE ratio of 18. Currently there are 4 analysts that rate Kennametal a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Kennametal has been 744,700 shares per day over the past 30 days. Kennametal has a market cap of $2.6 billion and is part of the industrial goods sector and industrial industry. The stock has a beta of 1.85 and a short float of 6.3% with 5.50 days to cover. Shares are down 7.3% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Kennametal as a

hold

. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

  • The debt-to-equity ratio is somewhat low, currently at 0.66, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.14, which illustrates the ability to avoid short-term cash problems.
  • Net operating cash flow has increased to $84.25 million or 22.77% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -13.13%.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 15.4%. Since the same quarter one year prior, revenues fell by 15.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Machinery industry. The net income has significantly decreased by 190.9% when compared to the same quarter one year ago, falling from $50.87 million to -$46.23 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness 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.

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