VimpelCom (VIP) In A Perilous Reversal

Trade-Ideas LLC identified VimpelCom ( VIP) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified VimpelCom as such a stock due to the following factors:

  • VIP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $12.6 million.
  • VIP has traded 1.2 million shares today.
  • VIP is down 3.6% today.
  • VIP was up 6.8% yesterday.

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More details on VIP:

VimpelCom Ltd. provides telecommunications services in Italy, Russia, Ukraine, Kazakhstan, Uzbekistan, Tajikistan, Armenia, Georgia, Kyrgyzstan, Laos, Algeria, Bangladesh, and Pakistan. The stock currently has a dividend yield of 0.7%. Currently there are 3 analysts that rate VimpelCom a buy, 1 analyst rates it a sell, and 2 rate it a hold.

The average volume for VimpelCom has been 2.3 million shares per day over the past 30 days. VimpelCom has a market cap of $6.3 billion and is part of the technology sector and telecommunications industry. Shares are down 13.8% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates VimpelCom as a sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, weak operating cash flow and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • The debt-to-equity ratio is very high at 3.79 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, VIP maintains a poor quick ratio of 0.72, which illustrates the inability to avoid short-term cash problems.
  • VIP'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 36.70%, which is also worse than the performance of the S&P 500 Index. 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.
  • Net operating cash flow has decreased to $801.00 million or 27.31% when compared to the same quarter last year. Despite a decrease in cash flow VIMPELCOM LTD is still fairing well by exceeding its industry average cash flow growth rate of -54.13%.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Wireless Telecommunication Services industry and the overall market, VIMPELCOM LTD's return on equity significantly trails that of both the industry average and the S&P 500.
  • The revenue fell significantly faster than the industry average of 14.6%. Since the same quarter one year prior, revenues fell by 25.8%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.

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