Trade-Ideas: Westlake Chemical (WLK) Is Today's Weak On High Relative Volume 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 Westlake Chemical ( WLK) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Westlake Chemical as such a stock due to the following factors:

  • WLK has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $80.2 million.
  • WLK has traded 205,974 shares today.
  • WLK is trading at 5.95 times the normal volume for the stock at this time of day.
  • WLK is trading at a new low 6.01% 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 WLK:

Westlake Chemical Corporation manufactures and markets basic chemicals, vinyls, polymers, and fabricated building products. It operates through two segments, Olefins and Vinyls. The stock currently has a dividend yield of 0.9%. WLK has a PE ratio of 14.2. Currently there are 6 analysts that rate Westlake Chemical a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Westlake Chemical has been 766,700 shares per day over the past 30 days. Westlake Chemical has a market cap of $9.4 billion and is part of the basic materials sector and chemicals industry. The stock has a beta of 1.92 and a short float of 1.6% with 0.54 days to cover. Shares are up 16.4% year-to-date as of the close of trading on Monday.

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 Westlake Chemical as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.2%. Since the same quarter one year prior, revenues slightly increased by 6.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • WLK's debt-to-equity ratio is very low at 0.28 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 3.44, which clearly demonstrates the ability to cover short-term cash needs.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 30.48% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, WLK should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • WESTLAKE CHEMICAL CORP has improved earnings per share by 16.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, WESTLAKE CHEMICAL CORP increased its bottom line by earning $4.55 versus $2.88 in the prior year. This year, the market expects an improvement in earnings ($5.55 versus $4.55).
  • Net operating cash flow has significantly increased by 57.82% to $219.74 million when compared to the same quarter last year. In addition, WESTLAKE CHEMICAL CORP has also vastly surpassed the industry average cash flow growth rate of 4.16%.

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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