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Trade-Ideas: Autodesk (ADSK) 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 Autodesk (ADSK) 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 Autodesk as such a stock due to the following factors:

  • ADSK has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $167.9 million.
  • ADSK has traded 672,915 shares today.
  • ADSK is trading at 1.90 times the normal volume for the stock at this time of day.
  • ADSK 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 ADSK with the Ticky from Trade-Ideas. See the FREE profile for ADSK NOW at Trade-Ideas

More details on ADSK:

Autodesk, Inc. operates as a design software and services company worldwide. The stock currently has a dividend yield of 21.8%. ADSK has a PE ratio of 38.7. Currently there are 7 analysts that rate Autodesk a buy, 1 analyst rates it a sell, and 6 rate it a hold.

The average volume for Autodesk has been 2.9 million shares per day over the past 30 days. Autodesk has a market cap of $8.3 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 2.04 and a short float of 2% with 1.01 days to cover. Shares are up 5% 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 Autodesk 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, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • Despite currently having a low debt-to-equity ratio of 0.36, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that ADSK's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.41 is high and demonstrates strong liquidity.
  • AUTODESK INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, AUTODESK INC reported lower earnings of $1.07 versus $1.22 in the prior year. This year, the market expects an improvement in earnings ($1.75 versus $1.07).
  • ADSK, with its decline in revenue, slightly underperformed the industry average of 8.3%. Since the same quarter one year prior, revenues slightly dropped by 1.2%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • The gross profit margin for AUTODESK INC is currently very high, coming in at 93.63%. Regardless of ADSK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ADSK's net profit margin of 10.98% is significantly lower than the industry average.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

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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