Today's Weak On High Volume Stock: GenCorp (GY)

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

  • GY has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $12.2 million.
  • GY has traded 217,236 shares today.
  • GY is trading at 11.82 times the normal volume for the stock at this time of day.
  • GY is trading at a new low 7.07% 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 GY:

GenCorp Inc. designs, develops, manufactures, and sells aerospace and defense products and systems in the United States. The company operates in two segments, Aerospace and Defense, and Real Estate. The Aerospace and Defense segment offers aerospace and defense products and systems for the U.S. Currently there are 3 analysts that rate GenCorp a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for GenCorp has been 470,400 shares per day over the past 30 days. GenCorp has a market cap of $1.4 billion and is part of the industrial goods sector and aerospace/defense industry. The stock has a beta of 1.81 and a short float of 17.8% with 14.57 days to cover. Shares are up 24.4% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates GenCorp as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, increase in net income and good cash flow from operations. However, as a counter to these strengths, we find that the company's profit margins have been poor overall.

Highlights from the ratings report include:
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Aerospace & Defense industry. The net income increased by 373.0% when compared to the same quarter one year prior, rising from -$3.70 million to $10.10 million.
  • GENCORP INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, GENCORP INC swung to a loss, reporting -$0.93 versus $1.88 in the prior year. This year, the market expects an improvement in earnings ($0.55 versus -$0.93).
  • GY, with its decline in revenue, slightly underperformed the industry average of 0.3%. Since the same quarter one year prior, revenues slightly dropped by 9.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The gross profit margin for GENCORP INC is currently extremely low, coming in at 14.99%. Regardless of GY's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 2.29% trails the industry average.

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