Weak On High Volume: Origin Agritech (SEED)

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

  • SEED has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $2.8 million.
  • SEED has traded 106,287 shares today.
  • SEED is trading at 4.69 times the normal volume for the stock at this time of day.
  • SEED is trading at a new low 6.23% 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 SEED:

Origin Agritech Limited, an agricultural biotechnology company, engages in crop seed breeding and genetic improvement activities in the People's Republic of China. SEED has a PE ratio of 54.

The average volume for Origin Agritech has been 357,300 shares per day over the past 30 days. Origin Agritech has a market cap of $61.8 million and is part of the consumer goods sector and food & beverage industry. The stock has a beta of -0.79 and a short float of 1.6% with 0.25 days to cover. Shares are up 85.7% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Origin Agritech as a sell. Among the areas we feel are negative, one of the most important has been very high debt management risk by most measures.

Highlights from the ratings report include:
  • The debt-to-equity ratio of 1.48 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 0.06, which clearly demonstrates the inability to cover short-term cash needs.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to the other companies in the Food Products industry and the overall market, ORIGIN AGRITECH LTD's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • ORIGIN AGRITECH LTD has improved earnings per share by 41.9% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, ORIGIN AGRITECH LTD swung to a loss, reporting -$0.07 versus $0.05 in the prior year.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 11.1%. Since the same quarter one year prior, revenues slightly dropped by 6.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, and has traded in line with the S&P 500. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.

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