Weak On High Volume: Gentherm (THRM)

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

  • THRM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $13.9 million.
  • THRM has traded 60,063 shares today.
  • THRM is trading at 3.96 times the normal volume for the stock at this time of day.
  • THRM is trading at a new low 4.14% 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 THRM:

Gentherm Incorporated designs, develops, manufactures, and sells thermal management technologies and cable systems worldwide. It operates in two segments, Automotive and Industrial. THRM has a PE ratio of 3. Currently there are 6 analysts that rate Gentherm a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Gentherm has been 317,000 shares per day over the past 30 days. Gentherm has a market cap of $1.9 billion and is part of the consumer goods sector and automotive industry. The stock has a beta of 2.46 and a short float of 2.9% with 3.86 days to cover. Shares are up 46.6% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Gentherm as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, compelling growth in net income and expanding profit margins. We feel its strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 3.8%. Since the same quarter one year prior, revenues slightly increased by 6.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • THRM'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, THRM has a quick ratio of 1.52, which demonstrates the ability of the company to cover short-term liquidity needs.
  • GENTHERM INC has improved earnings per share by 17.0% 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 two years. We feel that this trend should continue. During the past fiscal year, GENTHERM INC increased its bottom line by earning $1.96 versus $0.94 in the prior year. This year, the market expects an improvement in earnings ($2.33 versus $1.96).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Auto Components industry average. The net income increased by 19.5% when compared to the same quarter one year prior, going from $16.58 million to $19.82 million.
  • 35.78% is the gross profit margin for GENTHERM INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 9.57% is above that of the industry average.

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