Braskem (BAK) Weak On High Volume Today

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

  • BAK has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $3.1 million.
  • BAK has traded 84,755 shares today.
  • BAK is trading at 3.19 times the normal volume for the stock at this time of day.
  • BAK is trading at a new low 5.04% 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 BAK:

Braskem S.A., together with its subsidiaries, produces and sells thermoplastic resins. The stock currently has a dividend yield of 4%. Currently there are no analysts that rate Braskem a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Braskem has been 630,400 shares per day over the past 30 days. Braskem has a market cap of $3.6 billion and is part of the basic materials sector and chemicals industry. Shares are down 37.8% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Braskem 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 notable return on equity. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and poor profit margins.

Highlights from the ratings report include:
  • Net operating cash flow has significantly increased by 668.16% to $702.23 million when compared to the same quarter last year. In addition, BRASKEM SA has also vastly surpassed the industry average cash flow growth rate of 101.57%.
  • 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. Compared to other companies in the Chemicals industry and the overall market on the basis of return on equity, BRASKEM SA has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Chemicals industry. The net income has significantly decreased by 56.1% when compared to the same quarter one year ago, falling from $179.72 million to $78.95 million.
  • The debt-to-equity ratio is very high at 8.90 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, BAK has a quick ratio of 0.63, this demonstrates the lack of ability of the company to cover short-term liquidity needs.

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