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

  • CLF has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $35.0 million.
  • CLF has traded 910,289 shares today.
  • CLF is trading at 2.17 times the normal volume for the stock at this time of day.
  • CLF is trading at a new low 5.01% 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 CLF:

Cliffs Natural Resources Inc., a mining and natural resources company, produces iron ore and metallurgical coal. The stock currently has a dividend yield of 10.2%. Currently there are 2 analysts that rate Cliffs Natural Resources a buy, 4 analysts rate it a sell, and 7 rate it a hold.

The average volume for Cliffs Natural Resources has been 9.4 million shares per day over the past 30 days. Cliffs Natural has a market cap of $712.7 million and is part of the basic materials sector and metals & mining industry. The stock has a beta of 2.18 and a short float of 42.2% with 7.93 days to cover. Shares are down 34.9% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Cliffs Natural Resources as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, poor profit margins, weak operating cash flow and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • 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 Metals & Mining industry. The net income has significantly decreased by 980.8% when compared to the same quarter one year ago, falling from -$70.30 million to -$759.80 million.
  • The gross profit margin for CLIFFS NATURAL RESOURCES INC is rather low; currently it is at 24.80%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -170.35% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$228.20 million or 178.29% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • CLF's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 68.25%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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.
  • CLF, with its decline in revenue, underperformed when compared the industry average of 17.4%. Since the same quarter one year prior, revenues fell by 27.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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