Telefonica Brasil (VIV) Is Today's Perilous Reversal Stock

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 "perilous reversal" (up big yesterday but down big today) 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 $37.8 million.
  • VIV has traded 581,042 shares today.
  • VIV is down 3.1% today.
  • VIV was up 5.5% yesterday.

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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 2.4%. Currently there are 4 analysts that rate Telefonica Brasil a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Telefonica Brasil has been 2.0 million shares per day over the past 30 days. Telefonica Brasil has a market cap of $21.8 billion and is part of the technology sector and telecommunications industry. Shares are up 6.3% year-to-date as of the close of trading on Friday.

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 Telefonica Brasil as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and expanding profit margins. 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 0.6%. 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 0.88 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 20.3% in earnings ($1.69 versus $2.12).
  • VIV has underperformed the S&P 500 Index, declining 15.09% from its price level of one year ago. 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.

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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