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 or Stephanie Link.

Trade-Ideas LLC identified

American Apparel

(

APP

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

  • APP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $5.0 million.
  • APP has traded 762,425 shares today.
  • APP is trading at 4.43 times the normal volume for the stock at this time of day.
  • APP is trading at a new low 8.68% 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.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in APP with the Ticky from Trade-Ideas. See the FREE profile for APP NOW at Trade-Ideas

More details on APP:

American Apparel, Inc. designs, manufactures, distributes, retails, and sells branded fashion basic apparel products, and clothing and accessories for women, men, children, and babies. It offers T-shirts, denim, sweaters, jackets, and accessories. Currently there is 1 analyst that rates American Apparel a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for American Apparel has been 1.4 million shares per day over the past 30 days. American has a market cap of $174.8 million and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 2.91 and a short float of 10.6% with 2.22 days to cover. Shares are down 18.7% year-to-date as of the close of trading on Friday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates American Apparel as a

sell

. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Highlights from the ratings report include:

  • 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 Textiles, Apparel & Luxury Goods industry. The net income has significantly decreased by 1167.9% when compared to the same quarter one year ago, falling from -$1.51 million to -$19.18 million.
  • The share price of AMERICAN APPAREL INC has not done very well: it is down 9.10% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • Net operating cash flow has significantly decreased to $2.00 million or 60.58% when compared to the same quarter last year. Despite a decrease in cash flow of 60.58%, AMERICAN APPAREL INC is in line with the industry average cash flow growth rate of -61.75%.
  • AMERICAN APPAREL INC 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. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, AMERICAN APPAREL INC reported poor results of -$0.96 versus -$0.35 in the prior year. This year, the market expects an improvement in earnings (-$0.25 versus -$0.96).
  • APP, with its decline in revenue, underperformed when compared the industry average of 16.9%. Since the same quarter one year prior, revenues slightly dropped by 5.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

null