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 Peabody Energy ( BTU) as a "dead cat bounce" (down big yesterday but up big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Peabody Energy as such a stock due to the following factors:

  • BTU has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $79.1 million.
  • BTU has traded 71,468 shares today.
  • BTU is up 3.8% today.
  • BTU was down 7.6% yesterday.

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More details on BTU:

Peabody Energy Corporation engages in the mining of coal. The company operates through Western U.S. Mining, Midwestern U.S. Mining, Australian Mining, Trading and Brokerage, and Corporate and Other segments. The stock currently has a dividend yield of 0.2%. Currently there are 7 analysts that rate Peabody Energy a buy, 2 analysts rate it a sell, and 8 rate it a hold.

The average volume for Peabody Energy has been 12.2 million shares per day over the past 30 days. Peabody Energy has a market cap of $1.3 billion and is part of the basic materials sector and metals & mining industry. The stock has a beta of 2.58 and a short float of 27.2% with 3.87 days to cover. Shares are down 37.1% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Peabody Energy as a sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, disappointing return on equity, weak operating cash flow, poor profit margins and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • The debt-to-equity ratio is very high at 2.20 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.47, which clearly demonstrates the inability to cover short-term cash needs.
  • 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 Oil, Gas & Consumable Fuels industry and the overall market, PEABODY ENERGY CORP'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 $86.50 million or 51.51% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • The gross profit margin for PEABODY ENERGY CORP is rather low; currently it is at 16.82%. Regardless of BTU's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, BTU's net profit margin of -30.54% significantly underperformed when compared to the industry average.
  • Looking at the price performance of BTU's shares over the past 12 months, there is not much good news to report: the stock is down 68.63%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than 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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