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Trade-Ideas: Lexmark International (LXK) Is Today's "Water-Logged And Getting Wetter" Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Lexmark International ( LXK) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Lexmark International as such a stock due to the following factors:

  • LXK has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $40.7 million.
  • LXK has traded 379,353 shares today.
  • LXK traded in a range 205.5% of the normal price range with a price range of $2.00.
  • LXK traded below its daily resistance level (quality: 22 days, meaning that the stock is crossing a resistance level set by the last 22 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in LXK with the Ticky from Trade-Ideas. See the FREE profile for LXK NOW at Trade-Ideas

More details on LXK:

Lexmark International, Inc. develops, manufactures, and supplies printing and imaging solutions for offices. It offers laser printers, inkjet printers, and multifunction devices, as well as cartridges and other supplies, services, and solutions. The stock currently has a dividend yield of 3%. LXK has a PE ratio of 19.5. Currently there are no analysts that rate Lexmark International a buy, 6 analysts rate it a sell, and 3 rate it a hold.

The average volume for Lexmark International has been 894,900 shares per day over the past 30 days. Lexmark International has a market cap of $2.5 billion and is part of the technology sector and computer hardware industry. The stock has a beta of 1.59 and a short float of 21% with 10.51 days to cover. Shares are up 69% year to date as of the close of trading on Wednesday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Lexmark International as a buy. The company's strengths can be seen in multiple areas, such as its increase in net income, good cash flow from operations, expanding profit margins, solid stock price performance and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Computers & Peripherals industry. The net income increased by 126.8% when compared to the same quarter one year prior, rising from $39.20 million to $88.90 million.
  • Net operating cash flow has significantly increased by 81.05% to $88.90 million when compared to the same quarter last year. In addition, LEXMARK INTL INC has also vastly surpassed the industry average cash flow growth rate of -24.17%.
  • 46.03% is the gross profit margin for LEXMARK INTL INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 9.98% trails the industry average.
  • Powered by its strong earnings growth of 152.72% and other important driving factors, this stock has surged by 93.36% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • LEXMARK INTL INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, LEXMARK INTL INC reported lower earnings of $1.49 versus $4.11 in the prior year. This year, the market expects an improvement in earnings ($3.85 versus $1.49).

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