Trade-Ideas: American Airlines Group (AAL) Is Today's Weak 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 American Airlines Group ( AAL) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified American Airlines Group as such a stock due to the following factors:

  • AAL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $396.3 million.
  • AAL has traded 5.5 million shares today.
  • AAL is trading at 7.79 times the normal volume for the stock at this time of day.
  • AAL is trading at a new low 5.02% 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 AAL:

American Airlines Group Inc., through its subsidiaries, operates in the airline industry. As of December 31, 2014, the company operated 983 mainline jets, as well as 566 regional aircrafts through regional airline subsidiaries and third-party regional carriers. The stock currently has a dividend yield of 0.8%. AAL has a PE ratio of 11. Currently there are 10 analysts that rate American Airlines Group a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for American Airlines Group has been 13.0 million shares per day over the past 30 days. American Airlines Group has a market cap of $33.9 billion and is part of the services sector and transportation industry. The stock has a beta of 3.85 and a short float of 5.1% with 3.23 days to cover. Shares are down 10.8% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates American Airlines Group as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth and notable return on equity. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet.

Highlights from the ratings report include:
  • Powered by its strong earnings growth of 100.00% and other important driving factors, this stock has surged by 25.66% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • AMERICAN AIRLINES GROUP INC reported significant earnings per share improvement 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 two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, AMERICAN AIRLINES GROUP INC turned its bottom line around by earning $3.92 versus -$8.48 in the prior year. This year, the market expects an improvement in earnings ($9.75 versus $3.92).
  • Net operating cash flow has significantly increased by 98.56% to $2,494.00 million when compared to the same quarter last year. Despite an increase in cash flow, AMERICAN AIRLINES GROUP INC's average is still marginally south of the industry average growth rate of 99.76%.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Airlines industry average, but is greater than that of the S&P 500. The net income increased by 94.2% when compared to the same quarter one year prior, rising from $480.00 million to $932.00 million.
  • The debt-to-equity ratio is very high at 6.85 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, AAL maintains a poor quick ratio of 0.83, which illustrates the inability to avoid short-term cash problems.

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