Perilous Reversal Watch: Turquoise Hill Resources (TRQ)

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

  • TRQ has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $14.2 million.
  • TRQ has traded 3.0 million shares today.
  • TRQ is down 23.5% today.
  • TRQ was up 6.3% yesterday.

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More details on TRQ:

Turquoise Hill Resources Ltd., together with its subsidiaries, operates as a mineral exploration, development, and mining company. The company's principal mineral resource property, the Oyu Tolgoi project, is a copper-gold project located in the South Gobi region of Mongolia. Currently there are 3 analysts that rate Turquoise Hill Resources a buy, 1 analyst rates it a sell, and none rate it a hold.

The average volume for Turquoise Hill Resources has been 2.6 million shares per day over the past 30 days. Turquoise Hill has a market cap of $4.1 billion and is part of the basic materials sector and metals & mining industry.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Turquoise Hill Resources as a sell. The company's weaknesses can be seen in multiple areas, such as its weak operating cash flow and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • Net operating cash flow has decreased to -$197.89 million or 32.85% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, TURQUOISE HILL RESOURCES LTD has marginally lower results.
  • TRQ'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 37.99%, 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.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, TURQUOISE HILL RESOURCES LTD underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • The current debt-to-equity ratio, 0.32, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.05 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • TURQUOISE HILL RESOURCES LTD reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. During the past fiscal year, TURQUOISE HILL RESOURCES LTD continued to lose money by earning -$0.51 versus -$0.89 in the prior year.

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