Weak On High Volume: Oi SA ADR (OIBR)

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 Oi SA ADR ( OIBR) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Oi SA ADR as such a stock due to the following factors:

  • OIBR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $5.2 million.
  • OIBR has traded 315,982 shares today.
  • OIBR is trading at 2.07 times the normal volume for the stock at this time of day.
  • OIBR is trading at a new low 3.19% 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 OIBR:

Oi S.A., through its subsidiaries, provides integrated telecommunication services for residential customers, companies, and governmental agencies in Brazil. It operates in three segments: Fixed-Line and Data Transmission Services, Mobile Services, and Other Services. Currently there is 1 analyst that rates Oi SA ADR a buy, 2 analysts rate it a sell, and 3 rate it a hold.

The average volume for Oi SA ADR has been 3.4 million shares per day over the past 30 days. Oi SA ADR has a market cap of $1.7 billion and is part of the technology sector and telecommunications industry. Shares are down 41.1% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Oi SA ADR as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, generally high debt management risk, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • OI SA 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. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, OI SA reported lower earnings of $3.90 versus $7.93 in the prior year. For the next year, the market is expecting a contraction of 106.4% in earnings (-$0.25 versus $3.90).
  • Although OIBR's debt-to-equity ratio of 2.18 is very high, it is currently less than that of the industry average. To add to this, OIBR has a quick ratio of 0.69, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • 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. In comparison to the other companies in the Diversified Telecommunication Services industry and the overall market, OI SA's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 86.44%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 100.00% compared to the year-earlier 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.
  • Net operating cash flow has decreased to $725.79 million or 25.70% when compared to the same quarter last year. Despite a decrease in cash flow of 25.70%, OI SA is in line with the industry average cash flow growth rate of -27.25%.

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