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

  • RFP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $8.7 million.
  • RFP has traded 73,650 shares today.
  • RFP is trading at 2.63 times the normal volume for the stock at this time of day.
  • RFP is trading at a new low 4.02% 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 RFP:

Resolute Forest Products Inc. operates in the forest products industry in the United States, Canada, and South Korea. It operates through four segments: Newsprint, Specialty Papers, Market Pulp, and Wood Products. Currently there is 1 analyst that rates Resolute Forest Products a buy, 1 analyst rates it a sell, and none rate it a hold.

The average volume for Resolute Forest Products has been 422,800 shares per day over the past 30 days. Resolute Forest has a market cap of $1.1 billion and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 2.03 and a short float of 7% with 4.75 days to cover. Shares are down 35.1% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Resolute Forest Products as a hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and poor profit margins.

Highlights from the ratings report include:
  • RESOLUTE FOREST PRODUCTS INC has improved earnings per share by 34.0% 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, RESOLUTE FOREST PRODUCTS INC continued to lose money by earning -$2.93 versus -$6.75 in the prior year. This year, the market expects an improvement in earnings (-$0.10 versus -$2.93).
  • RFP's debt-to-equity ratio is very low at 0.29 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, RFP has a quick ratio of 1.69, which demonstrates the ability of the company to cover short-term liquidity needs.
  • RFP, with its decline in revenue, underperformed when compared the industry average of 0.9%. Since the same quarter one year prior, revenues slightly dropped by 9.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The gross profit margin for RESOLUTE FOREST PRODUCTS INC is currently extremely low, coming in at 9.78%. Regardless of RFP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -3.58% trails the industry average.
  • RFP has underperformed the S&P 500 Index, declining 24.69% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.

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