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

  • LFL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $4.3 million.
  • LFL has traded 66,428 shares today.
  • LFL is trading at 3.52 times the normal volume for the stock at this time of day.
  • LFL is trading at a new low 4.02% 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 LFL:

LATAM Airlines Group S.A., together with its subsidiaries, provides passenger and cargo air transportation services in South America. Currently there is 1 analyst that rates LATAM Airlines Group a buy, 1 analyst rates it a sell, and 4 rate it a hold.

The average volume for LATAM Airlines Group has been 566,300 shares per day over the past 30 days. LATAM Airlines Group has a market cap of $6.6 billion and is part of the services sector and transportation industry. Shares are down 26.7% year-to-date as of the close of trading on Thursday.

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 LATAM Airlines Group as a sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, poor profit margins and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • Currently the debt-to-equity ratio of 1.54 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. To add to this, LFL has a quick ratio of 0.53, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • The gross profit margin for LATAM AIRLINES GROUP SA is currently lower than what is desirable, coming in at 28.87%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -1.93% trails that of the industry average.
  • LFL's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 26.94%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Airlines industry and the overall market, LATAM AIRLINES GROUP SA's return on equity significantly trails that of both the industry average and the S&P 500.
  • The revenue fell significantly faster than the industry average of 32.5%. Since the same quarter one year prior, revenues slightly dropped by 1.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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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