Sociedad Quimica Y Minera De Chile (SQM) Highlighted As Weak 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 Sociedad Quimica Y Minera De Chile ( SQM) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Sociedad Quimica Y Minera De Chile as such a stock due to the following factors:

  • SQM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $7.0 million.
  • SQM has traded 683,841 shares today.
  • SQM is trading at 7.32 times the normal volume for the stock at this time of day.
  • SQM is trading at a new low 12.07% 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 SQM:

Chemical and Mining Company of Chile Inc. produces and distributes specialty plant nutrients, iodine and its derivatives, lithium and its derivatives, industrial chemicals, potassium, and other products and services. The stock currently has a dividend yield of 6%. SQM has a PE ratio of 11. Currently there are 3 analysts that rate Sociedad Quimica Y Minera De Chile a buy, 1 analyst rates it a sell, and 2 rate it a hold.

The average volume for Sociedad Quimica Y Minera De Chile has been 634,800 shares per day over the past 30 days. Sociedad Quimica Y Minera De Chile has a market cap of $5.0 billion and is part of the basic materials sector and chemicals industry. Shares are down 20.9% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Sociedad Quimica Y Minera De Chile as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.

Highlights from the ratings report include:

  • The debt-to-equity ratio is somewhat low, currently at 0.79, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with this, the company maintains a quick ratio of 2.79, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for SOC QUIMICA Y MINERA DE CHI is rather high; currently it is at 51.12%. It has increased significantly from the same period last year. Along with this, the net profit margin of 18.50% is above that of the industry average.
  • SQM, with its decline in revenue, underperformed when compared the industry average of 14.1%. Since the same quarter one year prior, revenues fell by 27.4%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • Looking at the price performance of SQM's shares over the past 12 months, there is not much good news to report: the stock is down 38.49%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than 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.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. In comparison to the other companies in the Chemicals industry and the overall market, SOC QUIMICA Y MINERA DE CHI's return on equity is significantly below that of the industry average and is below that of the S&P 500.

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