Perilous Reversal Watch: Methanex (MEOH)

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

  • MEOH has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $29.8 million.
  • MEOH has traded 199,569 shares today.
  • MEOH is down 3% today.
  • MEOH was up 7% yesterday.

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More details on MEOH:

Methanex Corporation produces and supplies methanol in the Asia Pacific, North America, Europe, and South America. It also purchases methanol produced by others under methanol offtake contracts and on the spot market. The company was founded in 1968 and is headquartered in Vancouver, Canada. The stock currently has a dividend yield of 3.7%. MEOH has a PE ratio of 13. Currently there are 4 analysts that rate Methanex a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Methanex has been 1.0 million shares per day over the past 30 days. Methanex has a market cap of $2.7 billion and is part of the basic materials sector and chemicals industry. Shares are down 4.2% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Methanex as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:
  • The debt-to-equity ratio is somewhat low, currently at 0.91, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.32, which illustrates the ability to avoid short-term cash problems.
  • MEOH, with its decline in revenue, underperformed when compared the industry average of 7.3%. Since the same quarter one year prior, revenues fell by 24.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 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. In comparison to the other companies in the Chemicals industry and the overall market, METHANEX CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • The gross profit margin for METHANEX CORP is currently extremely low, coming in at 7.15%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -5.38% is significantly below that of the industry average.

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