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

  • PPL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $154.7 million.
  • PPL has traded 1.1 million shares today.
  • PPL is trading at 2.97 times the normal volume for the stock at this time of day.
  • PPL 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 PPL with the Ticky from Trade-Ideas. See the FREE profile for PPL NOW at Trade-Ideas

More details on PPL:

PPL Corporation, an energy and utility holding company, engages in the generation, transmission, distribution, and sale of electricity to wholesale and retail customers in the United States and the United Kingdom. The company operates in four segments: Kentucky Regulated, U.K. The stock currently has a dividend yield of 4.8%. PPL has a PE ratio of 12.4. Currently there are 3 analysts that rate PPL a buy, no analysts rate it a sell, and 9 rate it a hold.

The average volume for PPL has been 4.5 million shares per day over the past 30 days. PPL has a market cap of $19.4 billion and is part of the utilities sector and utilities industry. The stock has a beta of 0.18 and a short float of 2% with 2.39 days to cover. Shares are up 7.4% 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 PPL as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, good cash flow from operations, increase in stock price during the past year and attractive valuation levels. 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:

  • The revenue growth came in higher than the industry average of 16.5%. Since the same quarter one year prior, revenues rose by 36.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Electric Utilities industry. The net income increased by 49.4% when compared to the same quarter one year prior, rising from $271.00 million to $405.00 million.
  • Net operating cash flow has significantly increased by 221.00% to $703.00 million when compared to the same quarter last year. In addition, PPL CORP has also vastly surpassed the industry average cash flow growth rate of 18.99%.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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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