Strong On High Relative Volume: Gerdau (GGB)

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

  • GGB has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $23.4 million.
  • GGB has traded 1.9 million shares today.
  • GGB is trading at 5.98 times the normal volume for the stock at this time of day.
  • GGB is trading at a new high 5.04% above yesterday's close.

'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into 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. 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 GGB:

Gerdau S.A. produces and commercializes steel products worldwide. The company operates through Brazil Business Operation, North America Business Operation, South America Business Operation, and Special Steel Business Operation segments. The stock currently has a dividend yield of 1.6%. GGB has a PE ratio of 2. Currently there are no analysts that rate Gerdau a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Gerdau has been 8.3 million shares per day over the past 30 days. Gerdau has a market cap of $3.9 billion and is part of the basic materials sector and metals & mining industry. Shares are up 96.7% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Gerdau as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, poor profit margins, weak operating cash flow and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, GERDAU SA underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • The gross profit margin for GERDAU SA is currently extremely low, coming in at 14.81%. It has decreased from the same quarter the previous year.
  • Net operating cash flow has decreased to $261.72 million or 11.71% when compared to the same quarter last year. Despite a decrease in cash flow GERDAU SA is still fairing well by exceeding its industry average cash flow growth rate of -39.56%.
  • GERDAU SA has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, GERDAU SA swung to a loss, reporting -$0.68 versus $0.31 in the prior year. This year, the market expects an improvement in earnings ($0.14 versus -$0.68).
  • The change in net income from the same quarter one year ago has significantly exceeded that of the Metals & Mining industry average, but is less than that of the S&P 500. The net income has significantly decreased by 97.3% when compared to the same quarter one year ago, falling from $92.03 million to $2.45 million.

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