Trade-Ideas: Solazyme (SZYM) Is Today's Weak On High Relative 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 Solazyme ( SZYM) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Solazyme as such a stock due to the following factors:

  • SZYM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $3.3 million.
  • SZYM has traded 129,328 shares today.
  • SZYM is trading at 2.63 times the normal volume for the stock at this time of day.
  • SZYM is trading at a new low 3.12% 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 SZYM:

Solazyme, Inc. manufactures and sells renewable oils and other bioproducts. Its proprietary technology transforms a range of plant-based sugars into triglyceride oils and other bioproducts. Currently there are 3 analysts that rate Solazyme a buy, 1 analyst rates it a sell, and 1 rates it a hold.

The average volume for Solazyme has been 984,800 shares per day over the past 30 days. Solazyme has a market cap of $288.2 million and is part of the basic materials sector and chemicals industry. The stock has a beta of 0.68 and a short float of 29% with 18.29 days to cover. Shares are up 39.5% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

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

Highlights from the ratings report include:
  • 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, SOLAZYME INC'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 -$38.67 million or 116.33% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The debt-to-equity ratio is very high at 2.32 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 9.16, which shows the ability to cover short-term cash needs.
  • Looking at the price performance of SZYM's shares over the past 12 months, there is not much good news to report: the stock is down 64.22%, 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.
  • SOLAZYME INC's earnings per share declined by 16.3% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, SOLAZYME INC reported poor results of -$2.13 versus -$1.81 in the prior year. This year, the market expects an improvement in earnings (-$1.59 versus -$2.13).

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