Contrarian Ideas: 8 Stocks with Troubling EPS Trends and Increased Short Selling

Contrarian Ideas: 8 Stocks with Troubling EPS Trends and Increased Short Selling

Research  these Stocks on Kapitall’s Playground Now

 
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Here at Kapitall we like to produce some bullish investing ideas, but what about some stocks to avoid? Shorts may love this list, as well as contrarain investors looking to jump in when bulls are looking the other away. 

To create the list below we started our screen by searching for stocks with decreasing profits over three consecutive year intervals measured by Diluted Normalized earnings per share. These statistics can be considered bearish.

EPS stands for earnings per share and is a standard measure of profitability for any firm. “Normalized” earnings simply refers to the earnings figure that has been adjusted for any one time event such as the sale of land, or some sudden spike in demand in the whole industry, which does not really reflect the particular company’s profitability.

The diluted normalized EPS gives a more accurate picture of the company’s profitability. A falling diluted normalized EPS is usually not a good sign but it is not the only sign

To compliment these results we wanted to see which have been experiencing increased short activity. Short sellers benefit when share price falls. Their collectively increased short positions on a stock indicates a belief that there is more downside than upside to price in. For this list we screen for increased shorting month over month.

Interactive Chart: Use the Compar-O-Matic to see how Market Cap has decreased in all of the stocks mentioned below over the last 2 years.

Consider the names on this list. Are short sellers right that these names have downside to price in? Are they poised to reverse their profitability trends?

1. AK Steel Holding Corporation (AKS, Earnings, Analysts, Financials): Produces flat-rolled carbon, stainless, and electrical steels, and tubular products primarily in the United States and internationally. Market cap at $456.5M, most recent closing price at $3.35.

Diluted normalized EPS decreased from -0.68 to -0.74 during the first time interval (12 months ending 2010-12-31 vs. 12 months ending 2009-12-31). For the second time interval, diluted normalized EPS decreased from -0.74 to -1.42 (12 months ending 2011-12-31 vs. 12 months ending 2010-12-31). And for the last time interval, the EPS decreased from -1.42 to -9.09 (12 months ending 2012-12-31 vs. 12 months ending 2011-12-31).

Shares shorted have increased from 33.98M to 37.63M over the last month, an increase which represents about 2.72% of the company's float of 134.32M shares. Days to cover ratio at 5.59 days.
 

2. Cornerstone Therapeutics Inc. (CRTX, Earnings, Analysts, Financials): Engages in the acquisition, development, and commercialization of branded and generic pharmaceuticals primarily for the respiratory and related markets in the United States. Market cap at $193.19M, most recent closing price at $7.23.

Diluted normalized EPS decreased from 1.15 to 0.54 during the first time interval (12 months ending 2009-12-31 vs. 12 months ending 2008-12-31). For the second time interval, diluted normalized EPS decreased from 0.54 to 0.24 (12 months ending 2010-12-31 vs. 12 months ending 2009-12-31). And for the last time interval, the EPS decreased from 0.24 to -0.03 (12 months ending 2011-12-31 vs. 12 months ending 2010-12-31).

Shares shorted have increased from 138.83K to 238.78K over the last month, an increase which represents about 1.2% of the company's float of 8.36M shares. Days to cover ratio at 4.85 days.
 

3. First Solar, Inc. (FSLR, Earnings, Analysts, Financials): First Solar, Inc. manufactures and sells solar modules using a thin-film semiconductor technology. Market cap at $2.41B, most recent closing price at $27.60.

Diluted normalized EPS decreased from 7.78 to 7.68 during the first time interval (12 months ending 2010-12-31 vs. 12 months ending 2009-12-26). For the second time interval, diluted normalized EPS decreased from 7.68 to 5.7 (12 months ending 2011-12-31 vs. 12 months ending 2010-12-31). And for the last time interval, the EPS decreased from 5.7 to 2.4 (12 months ending 2012-12-31 vs. 12 months ending 2011-12-31).

Shares shorted have increased from 16.71M to 17.77M over the last month, an increase which represents about 1.76% of the company's float of 60.34M shares. Days to cover ratio at 3.54 days.
 

4. Genco Shipping & Trading Ltd. (GNK, Earnings, Analysts, Financials): Engages in the ocean transportation of drybulk cargoes through the ownership and operation of drybulk carrier vessels worldwide. Market cap at $118.64M, most recent closing price at $2.68.

Diluted normalized EPS decreased from 7.16 to 4.73 during the first time interval (12 months ending 2009-12-31 vs. 12 months ending 2008-12-31). For the second time interval, diluted normalized EPS decreased from 4.73 to 4.07 (12 months ending 2010-12-31 vs. 12 months ending 2009-12-31). And for the last time interval, the EPS decreased from 4.07 to 0.72 (12 months ending 2011-12-31 vs. 12 months ending 2010-12-31).

Shares shorted have increased from 8.06M to 8.66M over the last month, an increase which represents about 2.21% of the company's float of 27.18M shares. Days to cover ratio at 10.95 days.
 

5. Och-Ziff Capital Management Group LLC (OZM, Earnings, Analysts, Financials): Och-Ziff Capital Management Group LLC is a publicly owned investment manager. Market cap at $4.17B, most recent closing price at $9.64.

Diluted normalized EPS decreased from 10.16 to 8.68 during the first time interval (12 months ending 2010-12-31 vs. 12 months ending 2009-12-31). For the second time interval, diluted normalized EPS decreased from 8.68 to 6.05 (12 months ending 2011-12-31 vs. 12 months ending 2010-12-31). And for the last time interval, the EPS decreased from 6.05 to 4.14 (12 months ending 2012-12-31 vs. 12 months ending 2011-12-31).

Shares shorted have increased from 921.64K to 3.07M over the last month, an increase which represents about 1.92% of the company's float of 112.11M shares. Days to cover ratio at 2.14 days.
 

6. RadioShack Corp. (RSH, Earnings, Analysts, Financials): Engages in the retail sale of consumer electronic goods and services through its RadioShack store chain and kiosk operations. Market cap at $334.69M, most recent closing price at $3.36.

Diluted normalized EPS decreased from 1.57 to 1.57 during the first time interval (12 months ending 2010-12-31 vs. 12 months ending 2009-12-31). For the second time interval, diluted normalized EPS decreased from 1.57 to 0.87 (12 months ending 2011-12-31 vs. 12 months ending 2010-12-31). And for the last time interval, the EPS decreased from 0.87 to -1.25 (12 months ending 2012-12-31 vs. 12 months ending 2011-12-31).

Shares shorted have increased from 32.56M to 33.76M over the last month, an increase which represents about 1.24% of the company's float of 97.09M shares. Days to cover ratio at 10.91 days.
 

7. Sears Holdings Corporation (SHLD, Earnings, Analysts, Financials): Operates as a retailer in the United States and Canada. Market cap at $5.41B, most recent closing price at $50.89.

Diluted normalized EPS decreased from 3.69 to 2.55 during the first time interval (52 weeks ending 2010-01-30 vs. 52 weeks ending 2009-01-31). For the second time interval, diluted normalized EPS decreased from 2.55 to 0.74 (52 weeks ending 2011-01-29 vs. 52 weeks ending 2010-01-30). And for the last time interval, the EPS decreased from 0.74 to -19.88 (52 weeks ending 2012-01-28 vs. 52 weeks ending 2011-01-29).

Shares shorted have increased from 8.25M to 8.82M over the last month, an increase which represents about 1.32% of the company's float of 43.07M shares. Days to cover ratio at 9.19 days.
 

8. Windstream Corporation (WIN, Earnings, Analysts, Financials): Provides communications and technology solutions in the United States. Market cap at $4.81B, most recent closing price at $8.14.

Diluted normalized EPS decreased from 0.95 to 0.77 during the first time interval (12 months ending 2010-12-31 vs. 12 months ending 2009-12-31). For the second time interval, diluted normalized EPS decreased from 0.77 to 0.58 (12 months ending 2011-12-31 vs. 12 months ending 2010-12-31). And for the last time interval, the EPS decreased from 0.58 to 0.38 (12 months ending 2012-12-31 vs. 12 months ending 2011-12-31).

Shares shorted have increased from 63.76M to 70.31M over the last month, an increase which represents about 1.12% of the company's float of 585.09M shares. Days to cover ratio at 8.17 days.
 

 

 

(Written by Ryan Horch)

 

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