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

  • DF has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $36.6 million.
  • DF has traded 281,761 shares today.
  • DF is trading at 3.90 times the normal volume for the stock at this time of day.
  • DF is trading at a new low 3.01% 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 DF:

Dean Foods Company, a food and beverage company, processes and distributes milk, and other dairy and dairy case products in the United States. The stock currently has a dividend yield of 1.5%. Currently there are 3 analysts that rate Dean Foods a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Dean Foods has been 1.6 million shares per day over the past 30 days. Dean has a market cap of $1.8 billion and is part of the consumer goods sector and food & beverage industry. The stock has a beta of 1.43 and a short float of 6.5% with 2.78 days to cover. Shares are down 4.4% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Dean Foods as a hold. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity.

Highlights from the ratings report include:
  • Net operating cash flow has significantly increased by 380.43% to $157.58 million when compared to the same quarter last year. In addition, DEAN FOODS CO has also vastly surpassed the industry average cash flow growth rate of 75.96%.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • DF, with its decline in revenue, slightly underperformed the industry average of 10.8%. Since the same quarter one year prior, revenues fell by 12.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Currently the debt-to-equity ratio of 1.55 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with the unfavorable debt-to-equity ratio, DF maintains a poor quick ratio of 0.97, which illustrates the inability to avoid short-term cash problems.
  • 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 Food Products industry and the overall market, DEAN FOODS CO's return on equity significantly trails that of both the industry average and the S&P 500.

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