Trade-Ideas LLC identified

Gerdau

(

GGB

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

  • GGB has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $3.7 million.
  • GGB has traded 790,820 shares today.
  • GGB is trading at 4.71 times the normal volume for the stock at this time of day.
  • GGB is trading at a new low 5.41% 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 GGB:

Gerdau S.A. produces and commercializes steel products worldwide. It operates through Brazil, North America, Latin America, Special Steel, and Iron Ore segments. The stock currently has a dividend yield of 3.6%. GGB has a PE ratio of 1. Currently there are no analysts that rate Gerdau a buy, 1 analyst rates it a sell, and 2 rate it a hold.

The average volume for Gerdau has been 4.2 million shares per day over the past 30 days. Gerdau has a market cap of $1.7 billion and is part of the basic materials sector and metals & mining industry. Shares are down 20.7% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Gerdau as a

sell

. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:

  • GERDAU SA has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, GERDAU SA reported lower earnings of $0.33 versus $0.39 in the prior year. For the next year, the market is expecting a contraction of 334.2% in earnings (-$0.77 versus $0.33).
  • 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 Metals & Mining industry. The net income has significantly decreased by 869.6% when compared to the same quarter one year ago, falling from $68.73 million to -$528.89 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, GERDAU SA underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • The gross profit margin for GERDAU SA is rather low; currently it is at 15.01%. It has decreased from the same quarter the previous year.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 71.71%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 875.00% compared to 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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