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Trade-Ideas: Emerson Electric (EMR) 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 Emerson Electric (EMR) 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 Emerson Electric as such a stock due to the following factors:

  • EMR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $219.9 million.
  • EMR has traded 483,294 shares today.
  • EMR traded in a range 303.7% of the normal price range with a price range of $2.58.
  • EMR traded below its daily resistance level (quality: 21 days, meaning that the stock is crossing a resistance level set by the last 21 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 EMR:

Emerson Electric Co., a diversified technology company, engages in designing and supplying products and technology, and providing engineering services and solutions to the industrial, commercial, and consumer markets worldwide. The stock currently has a dividend yield of 2.5%. EMR has a PE ratio of 31.7. Currently there are 5 analysts that rate Emerson Electric a buy, no analysts rate it a sell, and 16 rate it a hold.

The average volume for Emerson Electric has been 3.1 million shares per day over the past 30 days. Emerson Electric has a market cap of $46.4 billion and is part of the technology sector and electronics industry. The stock has a beta of 1.31 and a short float of 1.6% with 3.49 days to cover. Shares are up 22.7% year to date as of the close of trading on Monday.

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 Emerson Electric as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • Compared to its closing price of one year ago, EMR's share price has jumped by 36.57%, 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, EMR should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The current debt-to-equity ratio, 0.55, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.08, which illustrates the ability to avoid short-term cash problems.
  • Net operating cash flow has increased to $995.00 million or 17.61% when compared to the same quarter last year. In addition, EMERSON ELECTRIC CO has also modestly surpassed the industry average cash flow growth rate of 13.92%.
  • 42.81% is the gross profit margin for EMERSON ELECTRIC CO which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 3.05% trails the industry average.
  • EMR, with its decline in revenue, underperformed when compared the industry average of 8.9%. Since the same quarter one year prior, revenues slightly dropped by 2.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

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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