Today's Weak On High Volume Stock: Rock-Tenn Company (RKT)

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

  • RKT has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $72.3 million.
  • RKT has traded 360,179 shares today.
  • RKT is trading at 3.63 times the normal volume for the stock at this time of day.
  • RKT is trading at a new low 3.00% 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 RKT:

Rock-Tenn Company manufactures and sells containerboard and paperboard products in the Unites States, Canada, Mexico, Chile, Argentina, and Puerto Rico. The company operates through four segments: Corrugated Packaging, Consumer Packaging, Merchandising Displays, and Recycling. The stock currently has a dividend yield of 2%. RKT has a PE ratio of 18. Currently there are 5 analysts that rate Rock-Tenn Company a buy, 1 analyst rates it a sell, and 5 rate it a hold.

The average volume for Rock-Tenn Company has been 1.5 million shares per day over the past 30 days. Rock-Tenn has a market cap of $9.0 billion and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 1.27 and a short float of 8.8% with 9.30 days to cover. Shares are up 6% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Rock-Tenn Company as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, increase in net income, reasonable valuation levels and growth in earnings per share. We feel its strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • RKT's revenue growth has slightly outpaced the industry average of 0.4%. Since the same quarter one year prior, revenues slightly increased by 2.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Containers & Packaging industry. The net income increased by 32.6% when compared to the same quarter one year prior, rising from $82.80 million to $109.80 million.
  • ROCK-TENN CO has improved earnings per share by 36.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ROCK-TENN CO reported lower earnings of $3.29 versus $4.97 in the prior year. This year, the market expects an improvement in earnings ($4.09 versus $3.29).

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