Trade-Ideas: New Gold (NGD) Is Today's Strong 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 New Gold ( NGD) as a strong on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified New Gold as such a stock due to the following factors:

  • NGD has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $12.0 million.
  • NGD has traded 647,584 shares today.
  • NGD is trading at 4.66 times the normal volume for the stock at this time of day.
  • NGD is trading at a new high 4.18% above yesterday's close.

'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into 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. 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 NGD:

New Gold Inc., a gold mining company, engages in the acquisition, exploration, development, and operation of mineral properties. It primarily explores for gold, silver, and copper deposits. Currently there are 2 analysts that rate New Gold a buy, no analysts rate it a sell, and 8 rate it a hold.

The average volume for New Gold has been 3.5 million shares per day over the past 30 days. New has a market cap of $1.7 billion and is part of the basic materials sector and metals & mining industry. Shares are down 22.3% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates New Gold as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:
  • NEW GOLD INC's earnings have gone downhill when comparing its most recently reported quarter with the same quarter a year earlier. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, NEW GOLD INC reported poor results of -$0.95 versus -$0.38 in the prior year.
  • 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 Metals & Mining industry. The net income has significantly decreased by 2333.3% when compared to the same quarter one year ago, falling from -$1.80 million to -$43.80 million.
  • 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 Metals & Mining industry and the overall market, NEW GOLD INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $69.80 million or 14.25% when compared to the same quarter last year. Despite a decrease in cash flow NEW GOLD INC is still fairing well by exceeding its industry average cash flow growth rate of -46.77%.
  • This stock's share value has moved by only 33.20% over the past year. 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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