China Gerui Advanced Materials Group (CHOP): Today's Weak On High Volume Stock

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 China Gerui Advanced Materials Group ( CHOP) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified China Gerui Advanced Materials Group as such a stock due to the following factors:

  • CHOP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $4.3 million.
  • CHOP has traded 277,083 shares today.
  • CHOP is trading at 75.37 times the normal volume for the stock at this time of day.
  • CHOP is trading at a new low 3.11% 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 CHOP:

China Gerui Advanced Materials Group Limited operates as a contract manufacturer of cold-rolled narrow strip steel products in the People's Republic of China and internationally. The company converts steel manufactured by third parties into thin steel sheets and strips.

The average volume for China Gerui Advanced Materials Group has been 169,600 shares per day over the past 30 days. China Gerui Advanced Materials Group has a market cap of $22.5 million and is part of the basic materials sector and metals & mining industry. The stock has a beta of 2.82 and a short float of 2.3% with 0.08 days to cover. Shares are up 121.2% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates China Gerui Advanced Materials Group as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, weak operating cash flow and generally high debt management risk.

Highlights from the ratings report include:
  • CHINA GERUI ADV MATERIALS GP 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. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, CHINA GERUI ADV MATERIALS GP swung to a loss, reporting -$2.30 versus $4.50 in the prior year.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Metals & Mining industry. The net income has significantly decreased by 655.5% when compared to the same quarter one year ago, falling from -$4.37 million to -$33.04 million.
  • 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, CHINA GERUI ADV MATERIALS GP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$9.97 million or 228.03% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 62.69%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 700.00% 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.

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