Today's Weak On High Volume Stock: Gol Intelligent Airlines (GOL)

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

  • GOL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $15.9 million.
  • GOL has traded 185,478 shares today.
  • GOL is trading at 2.49 times the normal volume for the stock at this time of day.
  • GOL is trading at a new low 3.15% 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 GOL:

Gol Linhas Aereas Inteligentes S.A. provides regular and non-regular air transportation services for passengers, cargoes, and mailbags in Brazil and internationally. It operates in two segments, Flight Transportation and Smiles Loyalty Program. The stock currently has a dividend yield of 1.5%. Currently there are 4 analysts that rate Gol Intelligent Airlines a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Gol Intelligent Airlines has been 1.7 million shares per day over the past 30 days. Gol Intelligent Airlines has a market cap of $1.8 billion and is part of the services sector and transportation industry. Shares are up 39% year-to-date as of the close of trading on Tuesday.

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 Gol Intelligent Airlines as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, generally high debt management risk and poor profit margins.

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 Airlines industry. The net income has significantly decreased by 56.1% when compared to the same quarter one year ago, falling from -$37.25 million to -$58.17 million.
  • The debt-to-equity ratio is very high at 9.55 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, GOL maintains a poor quick ratio of 0.91, which illustrates the inability to avoid short-term cash problems.
  • The gross profit margin for GOL LINHAS AEREAS INTELIGENT is rather low; currently it is at 21.21%. Regardless of GOL's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, GOL's net profit margin of -5.26% significantly underperformed when compared to the industry average.
  • 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 Airlines industry and the overall market, GOL LINHAS AEREAS INTELIGENT's return on equity significantly trails that of both the industry average and the S&P 500.
  • GOL LINHAS AEREAS INTELIGENT 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. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, GOL LINHAS AEREAS INTELIGENT continued to lose money by earning -$1.22 versus -$2.74 in the prior year. This year, the market expects an improvement in earnings (-$0.22 versus -$1.22).

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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