Thursday, September 25, 2014

* Cliffs Natural (CLF) - A Picture Paints More Than a Thousand Words, It Erases 90% of a Stock Price

Share on StockTwits

CLF is trading $11.50, down 8.2% with IV30™ exploding up 23.2%. The Symbol Summary is included below.

Provided by Livevol

CLF stock is down ~90% in three-years, it's risk as reflected by the option market is exploding and the stock is down on news of that the quarterly price for metallurgical coal fell to a six year low.

But CLF isn't down 90% (only) because of that... it's down because of how poorly it compares to its peers. A picture paints more than a thousand words, it erases 90% of a stock price.

... and here is that picture:

CLF is showing the largest loss in earnings and the second largest shrinkage in revenue over the last two-years relative to its peers. (Click Image to Enlarge)

Let's move to the five-year stock chart.

Provided by Yahoo! Finance

So, basically, a disaster... Here's what's going on in the guts of the firm.  And disaster may be too small a word.

Total Revenue (TTM)
Total trailing-twelve-month revenue has fallen by ~20% in the last three (ish) years.

Total Revenue, 2-Year Growth %
Let's put the revenue drop into context by comparing CLF to a group of peers.  We can see, over the last two-years, in terms of revenue growth, CLF is the second worst.

Gross Margin %
Revenue is dropping... and so is gross margin %.  You know what's next...

Net Income (TTM)
CLF earnings have dropped from nearly $2B to to $101M in the last year.  There has certainly been a recovery from the lows (which were actually losses), but it ain't good.  How "ain't good?"  Next visualization please.

Net Income, 2-Year Growth %
The bottom line (pun intended) is this: In terms of earnings two-year growth, there's CLF... and then there's everybody else.  In the bad way...

Let's turn to risk pricing and the IV30™ chart in isolation, below.

Provided by Livevol

The implied volatility is the forward looking risk in the equity price as reflected by the option market (IV30™ looks forward exactly 30 calendar days).

In English, the red curve is the risk in future stock price movement.  Risk has exploded up nearly 70% in a matter of weeks as the stock continues to break lower lows. The next earnings release for the company is due out in a bout a month. The risk (IV30) will likely peak and very well may break an all-time high.

Finally, the Options Tab is included below.

Provided by Livevol

Using the at-the-money (ATM) straddle we can see that the option market reflects a price range of [$8.60, $13.40] by the end of trading on November 21st.

  • If you believe the stock will be outside that range on expiry or any date before then, then you think the volatility is too low.
  • If you believe that range is too wide, and that the stock will definitively be in that range on expiration, then you think volatility is too high.
  • If you're not sure, and can make an argument for either case, then you think volatility is priced just about right.

This is trade analysis, not a recommendation.

Legal Stuff:
Options involve risk. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Investors need a broker to trade options, and must meet suitability requirements.

The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. I am not engaged in rendering any legal or professional services by placing these general informational materials on this website.

I specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.

I make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that I endorse, sponsor, promote or am affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.

No comments:

Post a Comment