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Trade-Ideas: Wal-Mart Stores (WMT) 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 Wal-Mart Stores ( WMT) 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 Wal-Mart Stores as such a stock due to the following factors:

  • WMT has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $532.7 million.
  • WMT has traded 6.5 million shares today.
  • WMT traded in a range 439.5% of the normal price range with a price range of $4.43.
  • WMT traded below its daily resistance level (quality: 9 days, meaning that the stock is crossing a resistance level set by the last 9 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 WMT:

Wal-Mart Stores, Inc. operates retail stores in various formats worldwide. The company operates in three segments: Walmart U.S., Walmart International, and Sam's Club. The stock currently has a dividend yield of 2.5%. WMT has a PE ratio of 14.8. Currently there are 10 analysts that rate Wal-Mart Stores a buy, no analysts rate it a sell, and 8 rate it a hold.

The average volume for Wal-Mart Stores has been 5.7 million shares per day over the past 30 days. Wal-Mart Stores has a market cap of $246.6 billion and is part of the services sector and retail industry. The stock has a beta of 0.26 and a short float of 1.3% with 3.01 days to cover. Shares are up 11% year to date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Wal-Mart Stores as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, good cash flow from operations, growth in earnings per share and increase in net income. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:

  • WMT's revenue growth has slightly outpaced the industry average of 2.5%. Since the same quarter one year prior, revenues slightly increased by 2.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • WAL-MART STORES INC has improved earnings per share by 5.1% 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, WAL-MART STORES INC increased its bottom line by earning $5.02 versus $4.55 in the prior year. This year, the market expects an improvement in earnings ($5.20 versus $5.02).
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Food & Staples Retailing industry and the overall market, WAL-MART STORES INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • Net operating cash flow has slightly increased to $6,357.00 million or 3.18% when compared to the same quarter last year. In addition, WAL-MART STORES INC has also modestly surpassed the industry average cash flow growth rate of -5.65%.
  • The net income growth from the same quarter one year ago has exceeded that of the Food & Staples Retailing industry average, but is less than that of the S&P 500. The net income increased by 1.3% when compared to the same quarter one year prior, going from $4,016.00 million to $4,069.00 million.

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