Resolute Forest Products (RFP) Highlighted As Weak On High Volume

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

  • RFP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $3.8 million.
  • RFP has traded 116,419 shares today.
  • RFP is trading at 14.80 times the normal volume for the stock at this time of day.
  • RFP is trading at a new low 11.38% 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 RFP:

Resolute Forest Products Inc. operates in the forest products industry in the United States, Canada, and South Korea. It operates through four segments: Newsprint, Specialty Papers, Market Pulp, and Wood Products. Currently there is 1 analyst that rates Resolute Forest Products a buy, 1 analyst rates it a sell, and none rate it a hold.

The average volume for Resolute Forest Products has been 224,300 shares per day over the past 30 days. Resolute Forest has a market cap of $1.4 billion and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 2.03 and a short float of 5.4% with 8.66 days to cover. Shares are down 16.2% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Resolute Forest Products as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • RFP's debt-to-equity ratio is very low at 0.28 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, RFP has a quick ratio of 1.69, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has increased to $106.00 million or 10.41% when compared to the same quarter last year. Despite an increase in cash flow, RESOLUTE FOREST PRODUCTS INC's cash flow growth rate is still lower than the industry average growth rate of 38.07%.
  • The gross profit margin for RESOLUTE FOREST PRODUCTS INC is currently extremely low, coming in at 13.36%. Regardless of RFP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, RFP's net profit margin of -10.33% significantly underperformed when compared to the industry average.
  • 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 Paper & Forest Products industry. The net income has significantly decreased by 3533.3% when compared to the same quarter one year ago, falling from -$3.00 million to -$109.00 million.

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