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Trade-Ideas: CF Industries Holdings (CF) Is Today's "Storm The Castle" 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 CF Industries Holdings (CF) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified CF Industries Holdings as such a stock due to the following factors:

  • CF has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $158.4 million.
  • CF has traded 494,349 shares today.
  • CF is trading at 1.59 times the normal volume for the stock at this time of day.
  • CF crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on CF:

CF Industries Holdings, Inc. manufactures and distributes nitrogen and phosphate fertilizer products worldwide. It operates in two segments, Nitrogen and Phosphate. The stock currently has a dividend yield of 0.8%. CF has a PE ratio of 6.7. Currently there are 9 analysts that rate CF Industries Holdings a buy, 1 analyst rates it a sell, and 5 rate it a hold.

The average volume for CF Industries Holdings has been 1.1 million shares per day over the past 30 days. CF has a market cap of $10.9 billion and is part of the basic materials sector and chemicals industry. The stock has a beta of 1.69 and a short float of 2.6% with 2.02 days to cover. Shares are down 6% year to date as of the close of trading on Thursday.

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 CF Industries Holdings as a buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, notable return on equity, attractive valuation levels and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • The debt-to-equity ratio is somewhat low, currently at 0.62, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with this, the company maintains a quick ratio of 3.99, which clearly demonstrates the ability to cover short-term cash needs.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Chemicals industry and the overall market, CF INDUSTRIES HOLDINGS INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for CF INDUSTRIES HOLDINGS INC is rather high; currently it is at 56.67%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, CF's net profit margin of 29.05% significantly outperformed against the industry.
  • CF, with its decline in revenue, slightly underperformed the industry average of 2.6%. Since the same quarter one year prior, revenues slightly dropped by 1.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

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

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