Rentech Gets Support At 10-Week Line, Near Buy Point
By Scott Stoddard, Investor's Business Daily
Posted 03:52 PM ET
Rentech Nitrogen Partners (RNF), a fertilizer maker, has found support at its 10-week line and may be poised to retake its buy point.
Rentech broke out above its 40.15 flat-base entry on Nov. 2 after the company's Q3 earnings report handily beat estimates. But the stock reversed lower and ended below the buy point, highlighting the dangers of buying even strong stocks during a market correction.
Rentech will likely benefit from rising fertilizer demand as farmers seek to boost output following this year's drought. The company has also been helped by falling prices of natural gas, a key manufacturing input. And its recent acquisition of fertilizer producer Agrifos will add to earnings.
The company said last Thursday that Q3 profit rocketed 900% from a year earlier to 80 cents a share. It was the fourth straight triple-digit increase. Revenue jumped 56%, recovering from a 5% drop the previous quarter.
Rentech boasts a Composite Rating of 98, just shy of the best-possible 99 and tops in the Chemicals-Agricultural industry group, which was ranked 26th out of 197 as of Tuesday. That's up from 138 just three weeks ago.
The company's annual pretax margin was a robust 28% last year, and quarterly after-tax margin was 50.8% in Q3, adding to a strong fundamental picture.
Rentech has doubled since going public in November last year. Its Relative Strength line is at an all-time high. The stock recently pulled back to its 10-week line in light volume, as is desirable.
The stock is now just 4% off its high and just below its buy point.
While Rentech is somewhat thinly traded, its base does show two weeks of institutional accumulation. The base is third-stage, however, so it has a higher risk of failure than early-stage patterns.