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Bull of the Day: Constellium (CSTM)

Zacks

Sometimes a stock will get on my radar screen just based on the volume traded. That is the case with Constellium (CSTM) which jumped out at my one day when it traded over 1 million shares, which at the time, was around double the normal amount. Since that time, the stock has seen several more big volume days with the stock price climbing higher. It is also a Zacks Rank #2 (Buy) which is why it is the Bull of the Day.

Trading Volumes

When a stock normally trades around 300K – 500K shares a day a big volume day will trigger some alerts. I happen to have one alert like that, but what interests me is the fact that the big volume day happened with the stock not moving much. That told me that some big players were building a position and doing their best to keep the stock flat. That was the first 1M trading day on June 30.


By July 7, the stock traded 1.5M shares, easily triple the normal volume and was a summer Friday to boot. Summer Friday’s generally carry significantly less volume. Another 1M+ day started the following week, then a huge boost of 4.2M shares on July 11. Since then volume has remained strong and the whole time has seen the price steadily increase.

Earnings History

The earnings history isn’t exactly the best, with three misses and two beats in the last five reports. Normally I like to see a better track record, but the thing that stuck with me is the last two reports saw beats on the top line.

The most recent report that came on April 27 was a beat of $0.04 or 44% better than the Zacks Consensus Estimate. The 3.2% positive revenue surprise was music to investor's ears and the stock soared by 11% following the report.

Earnings Estimate Revisions

A stock with a Zacks Rank #2 (Buy) has to have a decent recent history of earnings estimate revisions. CSTM has just that as the Zacks Consensus Estimate has moved up from $0.62 in March to $0.68 in April and then to $0.71 in May. The estimate has remained at that level since then.

The 2018 Zacks Consensus Estimate has also seen some positive revisions. The number stood at $0.88 in March and then kicked higher to $0.91 in April. By May the estimate reached $0.94 and that is where it has remained.

Valuation

The value style score for CSTM is “A” and most of the reason for that is the 10x forward earnings multiple. That is well below the 34x industry average. The stock also trades at 0.1x price to sales multiple, and that is well below the 2.2x industry average.

The topline is growing for CSTM, 11.5% is the expected growth rate for 2017 and then another 3.1% for next year. The earnings growth is huge, but that is coming off a low base. That said, next year is showing EPS growth of 33%, which is well above the 25% industry average.

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