Weak On High Volume: Schnitzer Steel Industries (SCHN)

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

  • SCHN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $5.7 million.
  • SCHN has traded 72,222 shares today.
  • SCHN is trading at 7.06 times the normal volume for the stock at this time of day.
  • SCHN is trading at a new low 9.05% 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 SCHN:

Schnitzer Steel Industries, Inc. manufactures and exports recycled ferrous metal products worldwide. The company operates in three segments: Metals Recycling Business (MRB), Auto Parts Business (APB), and Steel Manufacturing Business (SMB). The stock currently has a dividend yield of 3.8%. Currently there is 1 analyst that rates Schnitzer Steel Industries a buy, 3 analysts rate it a sell, and 2 rate it a hold.

The average volume for Schnitzer Steel Industries has been 359,500 shares per day over the past 30 days. Schnitzer has a market cap of $525.1 million and is part of the basic materials sector and metals & mining industry. Shares are down 12.1% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Schnitzer Steel Industries as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, poor profit margins, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

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 11029.8% when compared to the same quarter one year ago, falling from $1.79 million to -$195.64 million.
  • The gross profit margin for SCHNITZER STEEL INDS is currently extremely low, coming in at 11.03%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -44.54% is significantly below that of the industry average.
  • The share price of SCHNITZER STEEL INDS has not done very well: it is down 24.59% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.
  • SCHNITZER STEEL INDS has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, SCHNITZER STEEL INDS turned its bottom line around by earning $0.20 versus -$10.53 in the prior year. For the next year, the market is expecting a contraction of 265.0% in earnings (-$0.33 versus $0.20).
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Metals & Mining industry and the overall market, SCHNITZER STEEL INDS's return on equity significantly trails that of both the industry average and the S&P 500.

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