Energy Company Of Minas Gerais (CIG): Today's Weak On High 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 Energy Company of Minas Gerais ( CIG) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Energy Company of Minas Gerais as such a stock due to the following factors:

  • CIG has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $12.1 million.
  • CIG has traded 947,074 shares today.
  • CIG is trading at 2.54 times the normal volume for the stock at this time of day.
  • CIG is trading at a new low 3.03% 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 CIG:

Companhia Energetica de Minas Gerais S.A. - CEMIG, through its subsidiaries, engages in the generation, transformation, transmission, distribution, and sale of electric energy primarily in Minas Gerais, Brazil. The stock currently has a dividend yield of 5.1%. Currently there are no analysts that rate Energy Company of Minas Gerais a buy, 1 analyst rates it a sell, and none rate it a hold.

The average volume for Energy Company of Minas Gerais has been 3.4 million shares per day over the past 30 days. Energy Company of Minas Gerais has a market cap of $6.5 billion and is part of the utilities sector and utilities industry. Shares are down 3.8% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Energy Company of Minas Gerais as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, generally high debt management risk, generally disappointing historical performance in the stock itself and poor profit margins.

Highlights from the ratings report include:
  • CIA ENERGETICA DE MINAS's earnings per share declined by 43.8% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, CIA ENERGETICA DE MINAS reported lower earnings of $1.41 versus $1.84 in the prior year. For the next year, the market is expecting a contraction of 51.1% in earnings ($0.69 versus $1.41).
  • 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 Electric Utilities industry. The net income has significantly decreased by 44.7% when compared to the same quarter one year ago, falling from $643.20 million to $355.93 million.
  • The debt-to-equity ratio of 1.20 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.40, which clearly demonstrates the inability to cover short-term cash 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 31.46%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 43.76% 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.
  • The gross profit margin for CIA ENERGETICA DE MINAS is rather low; currently it is at 23.79%. Regardless of CIG's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, CIG's net profit margin of 18.61% compares favorably to the industry average.

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