Strong On High Relative Volume: Walter Energy (WLT)

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 Walter Energy ( WLT) as a strong on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Walter Energy as such a stock due to the following factors:

  • WLT has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $2.6 million.
  • WLT has traded 432,038 shares today.
  • WLT is trading at 3.08 times the normal volume for the stock at this time of day.
  • WLT is trading at a new high 6.42% above yesterday's close.

'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into 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. 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 WLT:

Walter Energy, Inc. produces and exports metallurgical coal for the steel industry. The company operates through U.S. Operations, and Canadian and U.K. Operations segments. The stock currently has a dividend yield of 3.9%. Currently there is 1 analyst that rates Walter Energy a buy, 3 analysts rate it a sell, and 5 rate it a hold.

The average volume for Walter Energy has been 3.9 million shares per day over the past 30 days. Walter Energy has a market cap of $69.4 million and is part of the basic materials sector and metals & mining industry. The stock has a beta of 2.54 and a short float of 43.2% with 12.19 days to cover. Shares are down 21% 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 Walter Energy as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, poor profit margins, generally disappointing historical performance in the stock itself and generally high debt management risk.

Highlights from the ratings report include:
  • 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, WALTER ENERGY INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for WALTER ENERGY INC is currently extremely low, coming in at 5.39%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -30.01% is significantly below that of the industry average.
  • The debt-to-equity ratio is very high at 7.01 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Regardless of the company's weak debt-to-equity ratio, WLT has managed to keep a strong quick ratio of 1.67, which demonstrates the ability to cover short-term cash needs.
  • WLT'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 89.58%, 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.
  • The company, on the basis of net income growth from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Metals & Mining industry average. The net income increased by 1.8% when compared to the same quarter one year prior, going from -$100.72 million to -$98.90 million.

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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