Today's Weak On High Volume Stock: CenturyLink (CTL)

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

  • CTL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $136.7 million.
  • CTL has traded 1.5 million shares today.
  • CTL is trading at 5.41 times the normal volume for the stock at this time of day.
  • CTL is trading at a new low 3.01% 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 CTL:

CenturyLink, Inc. provides various communications services to residential, business, governmental, and wholesale customers in the United States. It operates through two segments, Business and Consumer. The stock currently has a dividend yield of 6.6%. CTL has a PE ratio of 24. Currently there are 6 analysts that rate CenturyLink a buy, 1 analyst rates it a sell, and 6 rate it a hold.

The average volume for CenturyLink has been 3.9 million shares per day over the past 30 days. CenturyLink has a market cap of $18.4 billion and is part of the technology sector and telecommunications industry. The stock has a beta of 0.96 and a short float of 8.1% with 8.85 days to cover. Shares are down 17.8% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates CenturyLink as a buy. The company's strengths can be seen in multiple areas, such as its expanding profit margins and notable return on equity. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • CENTURYLINK INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, CENTURYLINK INC turned its bottom line around by earning $1.35 versus -$0.43 in the prior year. This year, the market expects an improvement in earnings ($2.57 versus $1.35).
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 3.0%. Since the same quarter one year prior, revenues slightly dropped by 1.9%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • The gross profit margin for CENTURYLINK INC is rather high; currently it is at 57.13%. Regardless of CTL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 4.31% trails the industry average.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to the other companies in the Diversified Telecommunication Services industry and the overall market, CENTURYLINK INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • Even though the current debt-to-equity ratio is 1.39, it is still below the industry average, suggesting that this level of debt is acceptable within the Diversified Telecommunication Services industry. Despite the fact that CTL's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.59 is low and demonstrates weak liquidity.

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