Gerdau (GGB) Flagged As Strong On High Volume

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

  • GGB has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $20.7 million.
  • GGB has traded 619,910 shares today.
  • GGB is trading at 2.12 times the normal volume for the stock at this time of day.
  • GGB is trading at a new high 3.02% above yesterday's close.

'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into 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. 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 GGB:

Gerdau S.A. produces and commercializes steel products worldwide. It operates through Brazil, North America, Latin America, Special Steel, and Iron Ore segments. The stock currently has a dividend yield of 1.6%. GGB has a PE ratio of 2. Currently there are 2 analysts that rate Gerdau a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Gerdau has been 5.9 million shares per day over the past 30 days. Gerdau has a market cap of $4.7 billion and is part of the basic materials sector and metals & mining industry. Shares are down 20.9% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Gerdau as a hold. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including poor profit margins, a generally disappointing performance in the stock itself and deteriorating net income.

Highlights from the ratings report include:
  • Net operating cash flow has significantly increased by 300.39% to $296.46 million when compared to the same quarter last year. In addition, GERDAU SA has also vastly surpassed the industry average cash flow growth rate of -35.64%.
  • GGB's debt-to-equity ratio of 0.66 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that GGB's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.52 is high and demonstrates strong liquidity.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, GERDAU SA has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • The gross profit margin for GERDAU SA is rather low; currently it is at 16.42%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.80% trails that of the industry average.

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