Today's Dead Cat Bounce Stock: New Gold (NGD)

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 New Gold ( NGD) as a "dead cat bounce" (down big yesterday but up big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified New Gold as such a stock due to the following factors:

  • NGD has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $22.7 million.
  • NGD has traded 58,623 shares today.
  • NGD is up 3.2% today.
  • NGD was down 10.3% yesterday.

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More details on NGD:

New Gold Inc., a gold mining company, is engaged in the acquisition, exploration, development, and operation of mineral properties. It primarily explores for gold, silver, and copper deposits. Currently there are 4 analysts that rate New Gold a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for New Gold has been 4.5 million shares per day over the past 30 days. New has a market cap of $2.3 billion and is part of the basic materials sector and metals & mining industry. Shares are down 14.7% 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 New Gold as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • NEW GOLD INC 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. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, NEW GOLD INC swung to a loss, reporting -$0.38 versus $0.41 in the prior year.
  • 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 Metals & Mining industry. The net income has significantly decreased by 588.5% when compared to the same quarter one year ago, falling from $12.20 million to -$59.60 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 Metals & Mining industry and the overall market on the basis of return on equity, NEW GOLD INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • The share price of NEW GOLD INC has not done very well: it is down 10.25% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.
  • 44.36% is the gross profit margin for NEW GOLD INC which we consider to be strong. Regardless of NGD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, NGD's net profit margin of -35.20% significantly underperformed when compared to the industry average.

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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