Anglogold Ashanti (AU) Is Today's Perilous Reversal Stock

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

  • AU has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $40.9 million.
  • AU has traded 5.3 million shares today.
  • AU is down 3.1% today.
  • AU was up 8.9% yesterday.

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More details on AU:

AngloGold Ashanti Limited engages in the exploration, production, and marketing of gold. It also produces by-products, such as silver, uranium, and sulfuric acid. The stock currently has a dividend yield of 2%. AU has a PE ratio of 7.5. Currently there is 1 analyst that rates Anglogold Ashanti a buy, 2 analysts rate it a sell, and 1 rates it a hold.

The average volume for Anglogold Ashanti has been 3.5 million shares per day over the past 30 days. Anglogold Ashanti has a market cap of $4.8 billion and is part of the basic materials sector and metals & mining industry. Shares are down 61.7% year-to-date as of the close of trading on Monday.

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 Anglogold Ashanti 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, generally high debt management risk, disappointing return on equity and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • The debt-to-equity ratio of 1.15 is relatively high when compared with the industry average, suggesting a need for better debt level management.
  • 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 Metals & Mining industry and the overall market, ANGLOGOLD ASHANTI LTD's return on equity significantly trails that of both the industry average and the S&P 500.
  • ANGLOGOLD ASHANTI LTD 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 year. We anticipate that this should continue in the coming year. During the past fiscal year, ANGLOGOLD ASHANTI LTD reported lower earnings of $1.78 versus $3.83 in the prior year. For the next year, the market is expecting a contraction of 72.7% in earnings ($0.49 versus $1.78).
  • 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 99.5% when compared to the same quarter one year ago, falling from $187.00 million to $1.00 million.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 59.94%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 100.00% 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.

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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