Today's Weak On High Volume Stock: Avon Products (AVP)

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 Avon Products ( AVP) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Avon Products as such a stock due to the following factors:

  • AVP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $28.7 million.
  • AVP has traded 928,935 shares today.
  • AVP is trading at 5.63 times the normal volume for the stock at this time of day.
  • AVP is trading at a new low 4.03% below yesterday's close.

'Weak on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as material stock news, analyst downgrades, insider selling, selling from 'superinvestors,' or that hedge funds and traders are piling out of 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 (or avoid losses by trimming weak positions). 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 AVP:

Avon Products, Inc. manufactures and markets beauty and related products. The stock currently has a dividend yield of 1.7%. Currently there are 4 analysts that rate Avon Products a buy, 1 analyst rates it a sell, and 5 rate it a hold.

The average volume for Avon Products has been 3.6 million shares per day over the past 30 days. Avon has a market cap of $6.0 billion and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 1.37 and a short float of 6.4% with 16.05 days to cover. Shares are down 20.7% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Avon Products as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • 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 Personal Products industry. The net income has significantly decreased by 41.2% when compared to the same quarter one year ago, falling from $32.30 million to $19.00 million.
  • The debt-to-equity ratio is very high at 2.79 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, AVP has a quick ratio of 0.69, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • 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 Personal Products industry and the overall market, AVON PRODUCTS's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $105.50 million or 43.91% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 30.75%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 78.94% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.

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