Weak On High Volume: Frontline (FRO)

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 Frontline ( FRO) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Frontline as such a stock due to the following factors:

  • FRO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $7.3 million.
  • FRO has traded 539,659 shares today.
  • FRO is trading at 2.71 times the normal volume for the stock at this time of day.
  • FRO is trading at a new low 3.21% 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 FRO:

Frontline Ltd., a shipping company, through its subsidiaries, owns and operates oil tankers and oil/bulk/ore carriers. The company provides seaborne transportation of crude oil and oil products. Currently there is 1 analyst that rates Frontline a buy, 1 analyst rates it a sell, and 2 rate it a hold.

The average volume for Frontline has been 2.3 million shares per day over the past 30 days. Frontline has a market cap of $289.8 million and is part of the services sector and transportation industry. The stock has a beta of 2.34 and a short float of 8.7% with 2.44 days to cover. Shares are up 11.6% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Frontline as a sell. The company's weaknesses can be seen in multiple areas, such as its poor profit margins and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • The gross profit margin for FRONTLINE LTD is currently lower than what is desirable, coming in at 26.96%. Regardless of FRO's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, FRO's net profit margin of -9.60% significantly underperformed when compared to the industry average.
  • FRO has underperformed the S&P 500 Index, declining 9.48% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • Despite the weak revenue results, FRO has significantly outperformed against the industry average of 38.3%. Since the same quarter one year prior, revenues slightly dropped by 5.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • FRONTLINE LTD has improved earnings per share by 20.0% 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, FRONTLINE LTD continued to lose money by earning -$1.66 versus -$2.38 in the prior year. This year, the market expects an improvement in earnings ($0.20 versus -$1.66).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Oil, Gas & Consumable Fuels industry average. The net income increased by 0.4% when compared to the same quarter one year prior, going from -$13.03 million to -$12.98 million.

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