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Trade-Ideas: Altria Group (MO) 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 Altria Group (MO) 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 Altria Group as such a stock due to the following factors:

  • MO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $268.5 million.
  • MO has traded 7.0 million shares today.
  • MO is trading at 2.17 times the normal volume for the stock at this time of day.
  • MO 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 MO with the Ticky from Trade-Ideas. See the FREE profile for MO NOW at Trade-Ideas

More details on MO:

Altria Group, Inc., through its subsidiaries, engages in the manufacture and sale of cigarettes, smokeless products, and wine in the United States and internationally. The stock currently has a dividend yield of 5.4%. MO has a PE ratio of 16.1. Currently there are 6 analysts that rate Altria Group a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for Altria Group has been 8.7 million shares per day over the past 30 days. Altria Group has a market cap of $70.7 billion and is part of the consumer goods sector and tobacco industry. The stock has a beta of 0.42 and a short float of 0.9% with 2.46 days to cover. Shares are up 12.1% 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 Altria Group as a buy. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, notable return on equity, expanding profit margins, good cash flow from operations and increase in net income. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:

  • ALTRIA GROUP INC has improved earnings per share by 5.0% 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, ALTRIA GROUP INC increased its bottom line by earning $2.06 versus $1.64 in the prior year. This year, the market expects an improvement in earnings ($2.39 versus $2.06).
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Tobacco industry and the overall market, ALTRIA GROUP INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for ALTRIA GROUP INC is rather high; currently it is at 57.47%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 27.97% is above that of the industry average.
  • Net operating cash flow has increased to -$1,223.00 million or 36.36% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -8.60%.
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.

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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