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Trade-Ideas: L Brands (LTD) 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 L Brands (LTD) 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 L Brands as such a stock due to the following factors:

  • LTD has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $116.5 million.
  • LTD has traded 2.2 million shares today.
  • LTD traded in a range 217.8% of the normal price range with a price range of $2.39.
  • LTD traded below its daily resistance level (quality: 63 days, meaning that the stock is crossing a resistance level set by the last 63 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 LTD:

L Brands, Inc. operates as a specialty retailer of women's intimate and other apparel, beauty and personal care products, and accessories. The stock currently has a dividend yield of 2%. LTD has a PE ratio of 21.9. Currently there are 11 analysts that rate L Brands a buy, 3 analysts rate it a sell, and 9 rate it a hold.

The average volume for L Brands has been 1.9 million shares per day over the past 30 days. L has a market cap of $17.4 billion and is part of the services sector and retail industry. The stock has a beta of 0.77 and a short float of 3.5% with 4.58 days to cover. Shares are up 27.3% year to date as of the close of trading on Friday.

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 L Brands as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth, good cash flow from operations, growth in earnings per share and increase in net income. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:

  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • LTD's revenue growth trails the industry average of 19.9%. Since the same quarter one year prior, revenues slightly increased by 4.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Net operating cash flow has increased to $474.00 million or 22.16% when compared to the same quarter last year. In addition, L BRANDS INC has also modestly surpassed the industry average cash flow growth rate of 14.35%.
  • L BRANDS INC has improved earnings per share by 24.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, L BRANDS INC reported lower earnings of $2.54 versus $2.71 in the prior year. This year, the market expects an improvement in earnings ($3.21 versus $2.54).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Specialty Retail industry average. The net income increased by 23.9% when compared to the same quarter one year prior, going from $143.65 million to $178.00 million.

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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