Stock To Watch: Alpha Natural Resources (ANR) In Perilous Reversal

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

  • ANR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $21.4 million.
  • ANR has traded 2.5 million shares today.
  • ANR is down 3.2% today.
  • ANR was up 5.9% yesterday.

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More details on ANR:

Alpha Natural Resources, Inc., together with its subsidiaries, is engaged in extracting, processing, and marketing thermal and metallurgical coal in Virginia, West Virginia, Kentucky, Pennsylvania, and Wyoming. Currently there are 2 analysts that rate Alpha Natural Resources a buy, 4 analysts rate it a sell, and 10 rate it a hold.

The average volume for Alpha Natural Resources has been 9.2 million shares per day over the past 30 days. Alpha Natural has a market cap of $710.5 million and is part of the basic materials sector and metals & mining industry. The stock has a beta of 2.41 and a short float of 29% with 8.06 days to cover. Shares are down 55% year-to-date as of the close of trading on Wednesday.

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 Alpha Natural Resources as a sell. The company's weaknesses can be seen in multiple areas, such as its poor profit margins, weak operating cash flow and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • The gross profit margin for ALPHA NATURAL RESOURCES INC is currently extremely low, coming in at 5.92%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -5.00% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$53.96 million or 182.51% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • ANR'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 40.22%, 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.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ALPHA NATURAL RESOURCES INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • ANR, with its decline in revenue, underperformed when compared the industry average of 3.2%. Since the same quarter one year prior, revenues fell by 16.6%. The declining revenue has not hurt the company's bottom line, with increasing 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.

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