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Trade-Ideas: Marathon Petroleum (MPC) Is Today's "Roof Leaker" 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 Marathon Petroleum ( MPC) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Marathon Petroleum as such a stock due to the following factors:

  • MPC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $237.9 million.
  • MPC has traded 2.9 million shares today.
  • MPC is trading at 2.86 times the normal volume for the stock at this time of day.
  • MPC crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

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

More details on MPC:

Marathon Petroleum Corporation, together with its subsidiaries, engages in refining, transporting, and marketing petroleum products primarily in the United States. It operates through Refining & Marketing, Speedway, and Pipeline Transportation segments. The stock currently has a dividend yield of 2.2%. MPC has a PE ratio of 7.6. Currently there are 7 analysts that rate Marathon Petroleum a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for Marathon Petroleum has been 3.0 million shares per day over the past 30 days. Marathon has a market cap of $23.4 billion and is part of the basic materials sector and energy industry. The stock has a beta of 2.82 and a short float of 1.3% with 1.36 days to cover. Shares are up 19.1% year to date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Marathon Petroleum as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, attractive valuation levels, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 10.3%. Since the same quarter one year prior, revenues rose by 28.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, MPC's share price has jumped by 52.00%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, MPC should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • MPC's debt-to-equity ratio is very low at 0.29 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.90 is somewhat weak and could be cause for future problems.
  • 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. In comparison to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, MARATHON PETROLEUM CORP has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.

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