Telefonica Brasil (VIV) Flagged As Strong On High Volume

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 Telefonica Brasil ( VIV) as a strong on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Telefonica Brasil as such a stock due to the following factors:

  • VIV has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $34.5 million.
  • VIV has traded 462,605 shares today.
  • VIV is trading at 7.01 times the normal volume for the stock at this time of day.
  • VIV is trading at a new high 4.01% above yesterday's close.

'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into 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. 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.

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More details on VIV:

Telefonica Brasil S.A. provides fixed-line telecommunications services to residential and commercial customers in Brazil. The stock currently has a dividend yield of 3.8%. VIV has a PE ratio of 6.5. Currently there are 4 analysts that rate Telefonica Brasil a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Telefonica Brasil has been 1.5 million shares per day over the past 30 days. Telefonica Brasil has a market cap of $22.4 billion and is part of the technology sector and telecommunications industry. Shares are up 1.6% year-to-date as of the close of trading on Thursday.

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TheStreet Quant Ratings rates Telefonica Brasil as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 1.1%. Since the same quarter one year prior, revenues rose by 14.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • VIV's debt-to-equity ratio is very low at 0.19 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.87 is somewhat weak and could be cause for future problems.
  • TELEFONICA BRASIL SA reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, TELEFONICA BRASIL SA reported lower earnings of $2.12 versus $2.92 in the prior year. For the next year, the market is expecting a contraction of 24.1% in earnings ($1.61 versus $2.12).
  • In its most recent trading session, VIV has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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.


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