Trade-Ideas: Cosan (CZZ) Is Today's Weak On High Relative Volume Stock

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

  • CZZ has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $4.7 million.
  • CZZ has traded 823,626 shares today.
  • CZZ is trading at 2.03 times the normal volume for the stock at this time of day.
  • CZZ is trading at a new low 3.18% 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 CZZ:

Cosan Limited, together with its subsidiaries, engages in sugar and ethanol, fuel, logistics services, lubricants, and piped natural gas businesses primarily in Brazil, rest of South America, Europe, the Middle East, Asia, and North America. The stock currently has a dividend yield of 2.4%. CZZ has a PE ratio of 4. Currently there is 1 analyst that rates Cosan a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Cosan has been 864,500 shares per day over the past 30 days. Cosan has a market cap of $1.2 billion and is part of the utilities sector and utilities industry. The stock has a beta of 2.93 and a short float of 2.1% with 2.24 days to cover. Shares are up 23.3% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Cosan as a sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, disappointing return on equity and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • The debt-to-equity ratio is very high at 3.40 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, CZZ maintains a poor quick ratio of 0.73, which illustrates the inability to avoid short-term cash problems.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, COSAN LTD has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • CZZ'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 31.02%, 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. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 34.3%. Since the same quarter one year prior, revenues fell by 29.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • COSAN LTD reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, COSAN LTD reported lower earnings of $0.10 versus $0.61 in the prior year. This year, the market expects an improvement in earnings ($2.63 versus $0.10).

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