Today's Dead Cat Bounce Stock: Keurig Green Mountain (GMCR)

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

  • GMCR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $264.2 million.
  • GMCR has traded 496,645 shares today.
  • GMCR is up 3.1% today.
  • GMCR was down 9.2% yesterday.

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More details on GMCR:

Keurig Green Mountain, Inc. produces and sells specialty coffee, coffeemakers, teas, and other beverages in the United States and Canada. The stock currently has a dividend yield of 1.1%. GMCR has a PE ratio of 28.1. Currently there are 8 analysts that rate Keurig Green Mountain a buy, 2 analysts rate it a sell, and 5 rate it a hold.

The average volume for Keurig Green Mountain has been 1.5 million shares per day over the past 30 days. Keurig Green Mountain has a market cap of $17.5 billion and is part of the consumer goods sector and food & beverage industry. The stock has a beta of 2.29 and a short float of 6.1% with 2.69 days to cover. Shares are down 18.4% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Keurig Green Mountain as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and reasonable valuation levels. We feel its strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 10.2%. Since the same quarter one year prior, revenues slightly increased by 2.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • GMCR's debt-to-equity ratio is very low at 0.20 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.12, which illustrates the ability to avoid short-term cash problems.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Food Products industry and the overall market, KEURIG GREEN MOUNTAIN INC's return on equity exceeds that of both the industry average and the S&P 500.
  • KEURIG GREEN MOUNTAIN INC's earnings per share declined by 5.8% 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, KEURIG GREEN MOUNTAIN INC increased its bottom line by earning $3.74 versus $3.16 in the prior year. This year, the market expects an improvement in earnings ($4.11 versus $3.74).
  • 46.36% is the gross profit margin for KEURIG GREEN MOUNTAIN INC which we consider to be strong. Regardless of GMCR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GMCR's net profit margin of 13.79% compares favorably to the industry average.

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