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Trade-Ideas: Williams-Sonoma (WSM) 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 Williams-Sonoma ( WSM) 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 Williams-Sonoma as such a stock due to the following factors:

  • WSM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $55.0 million.
  • WSM has traded 1.1 million shares today.
  • WSM traded in a range 201.8% of the normal price range with a price range of $2.64.
  • WSM traded below its daily resistance level (quality: 4 days, meaning that the stock is crossing a resistance level set by the last 4 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.

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More details on WSM:

Williams-Sonoma, Inc. operates as a multi-channel specialty retailer of home products. It operates in two segments, Direct-to-Customer and Retail. The stock currently has a dividend yield of 2.1%. WSM has a PE ratio of 22.8. Currently there are 6 analysts that rate Williams-Sonoma a buy, no analysts rate it a sell, and 16 rate it a hold.

The average volume for Williams-Sonoma has been 870,900 shares per day over the past 30 days. Williams-Sonoma has a market cap of $5.9 billion and is part of the services sector and retail industry. The stock has a beta of 1.39 and a short float of 7.9% with 7.90 days to cover. Shares are up 35.8% year to date as of the close of trading on Tuesday.

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 Williams-Sonoma as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, increase in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:

  • Powered by its strong earnings growth of 33.33% and other important driving factors, this stock has surged by 35.91% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, WSM should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • WILLIAMS-SONOMA INC has improved earnings per share by 33.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, WILLIAMS-SONOMA INC increased its bottom line by earning $2.56 versus $2.24 in the prior year. This year, the market expects an improvement in earnings ($2.79 versus $2.56).
  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Specialty Retail industry average. The net income increased by 28.5% when compared to the same quarter one year prior, rising from $30.72 million to $39.47 million.
  • WSM's revenue growth trails the industry average of 23.8%. Since the same quarter one year prior, revenues slightly increased by 8.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • WSM's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that WSM's debt-to-equity ratio is low, the quick ratio, which is currently 0.59, displays a potential problem in covering short-term cash needs.

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