Today's Weak On High Volume Stock: Diamond Foods (DMND)

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

  • DMND has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $10.8 million.
  • DMND has traded 58,124 shares today.
  • DMND is trading at 3.70 times the normal volume for the stock at this time of day.
  • DMND is trading at a new low 3.02% 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 DMND:

Diamond Foods, Inc., a packaged food company, processes, markets, and distributes snack products and nuts. It operates in two segments, Snacks and Nuts. The Snacks segment offers microwave popcorn products and potato chips under the Kettle and Pop Secret brands. Currently there are 4 analysts that rate Diamond Foods a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Diamond Foods has been 255,000 shares per day over the past 30 days. has a market cap of $911.3 million and is part of the consumer goods sector and food & beverage industry. The stock has a beta of 0.16 and a short float of 5.5% with 4.28 days to cover. Shares are up 10.2% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Diamond Foods as a hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and notable return on equity. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, generally higher debt management risk and poor profit margins.

Highlights from the ratings report include:
  • DIAMOND FOODS 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, DIAMOND FOODS INC continued to lose money by earning -$6.29 versus -$8.13 in the prior year. This year, the market expects an improvement in earnings ($1.04 versus -$6.29).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Food Products industry. The net income increased by 106.0% when compared to the same quarter one year prior, rising from -$105.63 million to $6.29 million.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 10.9%. Since the same quarter one year prior, revenues slightly dropped by 2.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • DMND has underperformed the S&P 500 Index, declining 12.82% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
  • The debt-to-equity ratio is very high at 2.14 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.

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