Weak On High Volume: 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 weak on high relative volume 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 $307.1 million.
  • GMCR has traded 2.9 million shares today.
  • GMCR is trading at 22.19 times the normal volume for the stock at this time of day.
  • GMCR is trading at a new low 9.03% 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 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 27. 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 1.7 million shares per day over the past 30 days. Keurig Green Mountain has a market cap of $15.7 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 6.2% with 2.43 days to cover. Shares are down 24.3% 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 increase in stock price during the past year. 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 10.3%. 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.
  • 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.
  • 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. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.

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