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

  • PEIX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $6.6 million.
  • PEIX has traded 80,826 shares today.
  • PEIX is trading at 2.14 times the normal volume for the stock at this time of day.
  • PEIX is trading at a new low 3.11% 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 PEIX:

Pacific Ethanol, Inc. produces and markets low-carbon renewable fuels in the Western United States. It sells ethanol primarily to gasoline refining and distribution companies. The company also provides ethanol transportation, storage, and delivery services through third-party service providers. PEIX has a PE ratio of 7. Currently there are 3 analysts that rate Pacific Ethanol a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Pacific Ethanol has been 892,700 shares per day over the past 30 days. Pacific Ethanol has a market cap of $226.9 million and is part of the basic materials sector and energy industry. The stock has a beta of 2.63 and a short float of 20.4% with 6.46 days to cover. Shares are down 12.9% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Pacific Ethanol as a hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including poor profit margins, weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • PACIFIC ETHANOL INC reported significant earnings per share improvement 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. This trend suggests that the performance of the business is improving. During the past fiscal year, PACIFIC ETHANOL INC turned its bottom line around by earning $0.64 versus -$0.39 in the prior year. This year, the market expects an improvement in earnings ($0.72 versus $0.64).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 59.5% when compared to the same quarter one year prior, rising from -$10.83 million to -$4.38 million.
  • Despite the weak revenue results, PEIX has outperformed against the industry average of 38.8%. Since the same quarter one year prior, revenues fell by 19.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The gross profit margin for PACIFIC ETHANOL INC is currently extremely low, coming in at 1.17%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -2.12% trails that of the industry average.
  • Net operating cash flow has significantly decreased to $7.33 million or 67.97% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

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