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Water-Logged And Getting Wetter: General Motors (GM)

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 General Motors ( GM) 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 General Motors as such a stock due to the following factors:

  • GM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $560.7 million.
  • GM has traded 12.1 million shares today.
  • GM traded in a range 235.8% of the normal price range with a price range of $1.79.
  • GM traded below its daily resistance level (quality: 11 days, meaning that the stock is crossing a resistance level set by the last 11 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 GM:

General Motors Company (GM) designs, manufactures, and markets cars, crossovers, trucks, and automobile parts worldwide. GM has a PE ratio of 13.4. Currently there are 9 analysts that rate General Motors a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for General Motors has been 13.4 million shares per day over the past 30 days. General has a market cap of $51.8 billion and is part of the consumer goods sector and automotive industry. The stock has a beta of 1.70 and a short float of 8.1% with 5.01 days to cover. Shares are up 29.9% year to date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates General Motors as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, attractive valuation levels, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 9.2%. Since the same quarter one year prior, revenues slightly increased by 3.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, GM's share price has jumped by 42.29%, 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, GM should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Net operating cash flow has increased to $4,893.00 million or 24.12% when compared to the same quarter last year. In addition, GENERAL MOTORS CO has also modestly surpassed the industry average cash flow growth rate of 18.11%.
  • The debt-to-equity ratio is somewhat low, currently at 0.70, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.82 is somewhat weak and could be cause for future problems.

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