Weak On High Volume: Telefonica Brasil (VIV)

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 weak on high relative volume 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 $32.1 million.
  • VIV has traded 216,276 shares today.
  • VIV is trading at 2.87 times the normal volume for the stock at this time of day.
  • VIV 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 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 2.5%. Currently there are 4 analysts that rate Telefonica Brasil a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Telefonica Brasil has been 1.8 million shares per day over the past 30 days. Telefonica Brasil has a market cap of $20.4 billion and is part of the technology sector and telecommunications industry. Shares are down 8.5% year-to-date as of the close of trading on Friday.

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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 attractive valuation levels, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, unimpressive growth in net income and weak operating cash flow.

Highlights from the ratings report include:
  • The gross profit margin for TELEFONICA BRASIL SA is rather high; currently it is at 62.53%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 10.68% is above that of the industry average.
  • 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 0.92 is somewhat weak and could be cause for future problems.
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Diversified Telecommunication Services industry average. The net income has decreased by 12.3% when compared to the same quarter one year ago, dropping from $338.39 million to $296.83 million.
  • Net operating cash flow has decreased to $908.34 million or 22.17% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, TELEFONICA BRASIL SA has marginally lower results.


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