Today's Perilous Reversal Stock: Fibria Celulose (FBR)

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 Fibria Celulose ( FBR) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Fibria Celulose as such a stock due to the following factors:

  • FBR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $20.4 million.
  • FBR has traded 183,614 shares today.
  • FBR is down 3.3% today.
  • FBR was up 5.2% yesterday.

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More details on FBR:

Fibria Celulose S.A. engages in the production, sale, and export of short fiber pulp. The company primarily offers bleached eucalyptus kraft pulp used in the manufacture of toilet paper; uncoated and coated paper for printing and writing; and coated cardboard for packaging. The stock currently has a dividend yield of 0.5%. FBR has a PE ratio of 33. Currently there is 1 analyst that rates Fibria Celulose a buy, 1 analyst rates it a sell, and 2 rate it a hold.

The average volume for Fibria Celulose has been 1.4 million shares per day over the past 30 days. Fibria Celulose has a market cap of $7.7 billion and is part of the consumer goods sector and consumer non-durables industry. Shares are up 15.2% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Fibria Celulose as a hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall.

Highlights from the ratings report include:
  • FIBRIA CELULOSE SA has improved earnings per share by 16.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, FIBRIA CELULOSE SA turned its bottom line around by earning $0.11 versus -$0.54 in the prior year. This year, the market expects an improvement in earnings ($0.33 versus $0.11).
  • The gross profit margin for FIBRIA CELULOSE SA is rather high; currently it is at 58.25%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -9.79% is in-line with the industry average.
  • The current debt-to-equity ratio, 0.57, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.88 is somewhat weak and could be cause for future 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 Paper & Forest Products industry and the overall market, FIBRIA CELULOSE SA's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $210.44 million or 18.03% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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