Arch Coal (ACI) Highlighted As Weak 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 Arch Coal ( ACI) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Arch Coal as such a stock due to the following factors:

  • ACI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $16.6 million.
  • ACI has traded 744,631 shares today.
  • ACI is trading at 2.01 times the normal volume for the stock at this time of day.
  • ACI is trading at a new low 4.05% 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 ACI:

Arch Coal, Inc. produces and sells thermal and metallurgical coal from surface and underground mines located in the United States. The stock currently has a dividend yield of 0.4%. Currently there are 3 analysts that rate Arch Coal a buy, 4 analysts rate it a sell, and 8 rate it a hold.

The average volume for Arch Coal has been 5.5 million shares per day over the past 30 days. Arch Coal has a market cap of $492.5 million and is part of the basic materials sector and metals & mining industry. The stock has a beta of 2.03 and a short float of 15% with 5.52 days to cover. Shares are down 50.1% 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 Arch Coal as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, poor profit margins, weak operating cash flow and generally high debt management risk.

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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 34.1% when compared to the same quarter one year ago, falling from -$72.21 million to -$96.86 million.
  • 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 Oil, Gas & Consumable Fuels industry and the overall market, ARCH COAL INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for ARCH COAL INC is currently extremely low, coming in at 12.84%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -13.57% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$38.07 million or 534.89% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The debt-to-equity ratio is very high at 2.53 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 2.55, which shows the ability to cover short-term cash 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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