Today's Weak On High Volume Stock: Alpha Natural Resources (ANR)

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.

Trade-Ideas LLC identified Alpha Natural Resources ( ANR) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Alpha Natural Resources as such a stock due to the following factors:

  • ANR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $3.3 million.
  • ANR has traded 1.4 million shares today.
  • ANR is trading at 5.04 times the normal volume for the stock at this time of day.
  • ANR is trading at a new low 8.34% 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 ANR:

Alpha Natural Resources, Inc., together with its subsidiaries, engages in extracting, processing, and marketing steam and metallurgical coal in Kentucky, Pennsylvania, Virginia, West Virginia, and Wyoming. It operates through two segments, Eastern Coal Operations and Western Coal Operations. Currently there is 1 analyst that rates Alpha Natural Resources a buy, 4 analysts rate it a sell, and 10 rate it a hold.

The average volume for Alpha Natural Resources has been 6.4 million shares per day over the past 30 days. Alpha Natural has a market cap of $201.1 million and is part of the basic materials sector and metals & mining industry. The stock has a beta of 2.41 and a short float of 39.4% with 15.30 days to cover. Shares are down 45.7% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Alpha Natural Resources 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:
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ALPHA NATURAL RESOURCES INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for ALPHA NATURAL RESOURCES INC is currently extremely low, coming in at 12.93%. Regardless of ANR's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, ANR's net profit margin of -11.36% significantly underperformed when compared to the industry average.
  • ANR'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 78.79%, 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 debt-to-equity ratio of 1.31 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, ANR's quick ratio is somewhat strong at 1.47, demonstrating the ability to handle short-term liquidity needs.
  • Despite the weak revenue results, ANR has outperformed against the industry average of 19.6%. Since the same quarter one year prior, revenues slightly dropped by 2.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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