Trade-Ideas LLC identified

Meritor

(

MTOR

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

  • MTOR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $6.5 million.
  • MTOR has traded 1.4 million shares today.
  • MTOR is trading at 4.99 times the normal volume for the stock at this time of day.
  • MTOR is trading at a new low 6.03% 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 MTOR:

Meritor, Inc. designs, develops, manufactures, markets, distributes, sells, services, and supports integrated systems, modules, and components to original equipment manufacturers (OEMs) and the aftermarket for the commercial vehicle, transportation, and industrial sectors worldwide. MTOR has a PE ratio of 3. Currently there is 1 analyst that rates Meritor a buy, no analysts rate it a sell, and 7 rate it a hold.

The average volume for Meritor has been 859,700 shares per day over the past 30 days. Meritor has a market cap of $715.5 million and is part of the consumer goods sector and automotive industry. The stock has a beta of 2.24 and a short float of 7.1% with 6.67 days to cover. Shares are down 14.6% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Meritor as a

hold

. Among the primary strengths of the company is its generally strong cash flow from operations. At the same time, however, we also find weaknesses including a generally disappointing performance in the stock itself, poor profit margins and feeble growth in the company's earnings per share.

Highlights from the ratings report include:

  • Net operating cash flow has increased to $44.00 million or 15.78% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -10.44%.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 12.9%. Since the same quarter one year prior, revenues slightly dropped by 5.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • The gross profit margin for MERITOR INC is rather low; currently it is at 16.69%. Regardless of MTOR's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 3.89% trails the industry average.
  • Looking at the price performance of MTOR's shares over the past 12 months, there is not much good news to report: the stock is down 36.84%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier 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.

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