Perilous Reversal Stock: Pacific Ethanol (PEIX)

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

  • PEIX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $31.9 million.
  • PEIX has traded 1.3 million shares today.
  • PEIX is down 3.2% today.
  • PEIX was up 10.6% yesterday.

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More details on PEIX:

Pacific Ethanol, Inc. produces and markets low carbon renewable fuels in the United States. It sells ethanol to gasoline refining and distribution companies.

The average volume for Pacific Ethanol has been 1.3 million shares per day over the past 30 days. Pacific Ethanol has a market cap of $222.8 million and is part of the basic materials sector and chemicals industry. The stock has a beta of 3.86 and a short float of 24% with 1.12 days to cover. Shares are up 210.6% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Pacific Ethanol as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and poor profit margins.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 7.9%. Since the same quarter one year prior, revenues slightly increased by 9.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 190.00% and other important driving factors, this stock has surged by 172.34% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • The gross profit margin for PACIFIC ETHANOL INC is currently extremely low, coming in at 10.03%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 3.99% trails the industry average.
  • The debt-to-equity ratio of 1.23 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, PEIX's quick ratio is somewhat strong at 1.43, demonstrating the ability to handle short-term liquidity needs.

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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