Perilous Reversal Stock: Pacific Ethanol (PEIX)

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

  • PEIX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $16.1 million.
  • PEIX has traded 180,549 shares today.
  • PEIX is down 3.8% today.
  • PEIX was up 10.3% yesterday.

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More details on PEIX:

Pacific Ethanol, Inc. produces and markets low-carbon renewable fuels in the Western United States. It sells ethanol primarily to gasoline refining and distribution companies. The company also provides ethanol transportation, storage, and delivery services through third-party service providers. PEIX has a PE ratio of 9. Currently there are 3 analysts that rate Pacific Ethanol a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Pacific Ethanol has been 1.1 million shares per day over the past 30 days. Pacific Ethanol has a market cap of $299.6 million and is part of the basic materials sector and energy industry. The stock has a beta of 2.41 and a short float of 16.9% with 3.51 days to cover. Shares are up 17.6% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Pacific Ethanol as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. However, as a counter to these strengths, we find that the company's profit margins have been poor overall.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 37.8%. Since the same quarter one year prior, revenues rose by 19.0%. 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.
  • PEIX's debt-to-equity ratio is very low at 0.19 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 3.80, which clearly demonstrates the ability to cover short-term cash needs.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, PACIFIC ETHANOL INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • The gross profit margin for PACIFIC ETHANOL INC is currently extremely low, coming in at 8.51%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 4.88% trails that of the industry average.

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