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Trade-Ideas: Green Mountain Coffee Roasters (GMCR) 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 Green Mountain Coffee Roasters (GMCR) 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 Green Mountain Coffee Roasters as such a stock due to the following factors:

  • GMCR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $325.8 million.
  • GMCR has traded 2.1 million shares today.
  • GMCR is trading at 6.02 times the normal volume for the stock at this time of day.
  • GMCR 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 GMCR with the Ticky from Trade-Ideas. See the FREE profile for GMCR NOW at Trade-Ideas

More details on GMCR:

Green Mountain Coffee Roasters, Inc. engages in the specialty coffee and coffeemaker businesses in the United States and Canada. GMCR has a PE ratio of 27.3. Currently there are 8 analysts that rate Green Mountain Coffee Roasters a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for Green Mountain Coffee Roasters has been 4.0 million shares per day over the past 30 days. Green Mountain Coffee Roasters has a market cap of $12.0 billion and is part of the consumer goods sector and food & beverage industry. The stock has a beta of 0.10 and a short float of 39.4% with 6.54 days to cover. Shares are up 91.9% 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 Green Mountain Coffee Roasters as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, compelling growth in net income and expanding profit margins. 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 revenue growth came in higher than the industry average of 4.0%. Since the same quarter one year prior, revenues rose by 11.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • GMCR's debt-to-equity ratio is very low at 0.12 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.46, which illustrates the ability to avoid short-term cash problems.
  • GREEN MTN COFFEE ROASTERS reported significant earnings per share improvement 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, GREEN MTN COFFEE ROASTERS increased its bottom line by earning $2.28 versus $1.30 in the prior year. This year, the market expects an improvement in earnings ($3.25 versus $2.28).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Food Products industry. The net income increased by 58.6% when compared to the same quarter one year prior, rising from $73.30 million to $116.27 million.
  • 48.48% is the gross profit margin for GREEN MTN COFFEE ROASTERS which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 12.02% is above that of the industry average.

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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