Today's Weak On High Volume Stock: LATAM Airlines Group (LFL)

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

  • LFL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $3.1 million.
  • LFL has traded 63,147 shares today.
  • LFL is trading at 3.66 times the normal volume for the stock at this time of day.
  • LFL is trading at a new low 4.01% 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 LFL:

Latam Airlines Group S.A., together with its subsidiaries, provides passenger and cargo air transportation services in America, Europe, and Oceania. Currently there are no analysts that rate LATAM Airlines Group a buy, 3 analysts rate it a sell, and 1 rates it a hold.

The average volume for LATAM Airlines Group has been 542,500 shares per day over the past 30 days. LATAM Airlines Group has a market cap of $3.8 billion and is part of the services sector and transportation industry. Shares are up 25.1% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates LATAM Airlines Group 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, poor profit margins and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • The debt-to-equity ratio is very high at 3.07 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.46, which clearly demonstrates the inability to cover short-term cash needs.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Airlines industry and the overall market, LATAM AIRLINES GROUP SA's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for LATAM AIRLINES GROUP SA is currently lower than what is desirable, coming in at 33.49%. Regardless of LFL's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, LFL's net profit margin of -4.50% significantly underperformed when compared to the industry average.
  • LFL'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 28.26%, 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. 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.
  • LFL, with its decline in revenue, underperformed when compared the industry average of 5.2%. Since the same quarter one year prior, revenues fell by 19.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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