Petroleo Brasileiro SA Petrobras (PBR) Showing Signs Of Being Water-Logged And Getting Wetter

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 Petroleo Brasileiro SA Petrobras ( PBR) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Petroleo Brasileiro SA Petrobras as such a stock due to the following factors:

  • PBR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $312.2 million.
  • PBR has traded 41.6 million shares today.
  • PBR traded in a range 216.9% of the normal price range with a price range of $0.93.
  • PBR traded below its daily resistance level (quality: 10 days, meaning that the stock is crossing a resistance level set by the last 10 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on PBR:

Petroleo Brasileiro S.A. - Petrobras operates as an integrated energy company in Brazil and internationally. PBR has a PE ratio of 6. Currently there are 2 analysts that rate Petroleo Brasileiro SA Petrobras a buy, 1 analyst rates it a sell, and 4 rate it a hold.

The average volume for Petroleo Brasileiro SA Petrobras has been 46.2 million shares per day over the past 30 days. Petroleo Brasileiro SA Petrobras has a market cap of $64.8 billion and is part of the basic materials sector and energy industry. Shares are up 38.8% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Petroleo Brasileiro SA Petrobras as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally high debt management risk, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • 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 Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 452.2% when compared to the same quarter one year ago, falling from $2,760.00 million to -$9,722.00 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 Oil, Gas & Consumable Fuels industry and the overall market, PETROLEO BRASILEIRO SA- PETR's return on equity significantly trails that of both the industry average and the S&P 500.
  • The debt-to-equity ratio of 1.12 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, PBR's quick ratio is somewhat strong at 1.21, demonstrating the ability to handle short-term liquidity needs.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 36.31%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 457.14% compared to the year-earlier quarter. 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.
  • PETROLEO BRASILEIRO SA- PETR has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, PETROLEO BRASILEIRO SA- PETR swung to a loss, reporting -$1.12 versus $1.70 in the prior year. This year, the market expects an improvement in earnings ($1.52 versus -$1.12).

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