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Mead Johnson Nutrition Company (MJN) Showing Signs Of Being Water-Logged And Getting Wetter

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 Mead Johnson Nutrition Company ( MJN) 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 Mead Johnson Nutrition Company as such a stock due to the following factors:

  • MJN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $130.6 million.
  • MJN has traded 750,201 shares today.
  • MJN traded in a range 233.5% of the normal price range with a price range of $3.70.
  • MJN traded below its daily resistance level (quality: 2 days, meaning that the stock is crossing a resistance level set by the last 2 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 MJN:

Mead Johnson Nutrition Company manufactures, distributes, and sells infant formulas, children's nutrition, and other nutritional products. The stock currently has a dividend yield of 1.8%. MJN has a PE ratio of 25.6. Currently there are 4 analysts that rate Mead Johnson Nutrition Company a buy, no analysts rate it a sell, and 8 rate it a hold.

The average volume for Mead Johnson Nutrition Company has been 2.1 million shares per day over the past 30 days. Mead Johnson Nutrition has a market cap of $15.4 billion and is part of the consumer goods sector and food & beverage industry. The stock has a beta of 0.58 and a short float of 1.8% with 2.02 days to cover. Shares are up 15.6% year to date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Mead Johnson Nutrition Company as a buy. The company's strengths can be seen in multiple areas, such as its notable return on equity, revenue growth, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.

Highlights from the ratings report include:

  • Compared to other companies in the Food Products industry and the overall market, MEAD JOHNSON NUTRITION CO's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • MJN's revenue growth has slightly outpaced the industry average of 3.8%. Since the same quarter one year prior, revenues slightly increased by 4.2%. 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.
  • The gross profit margin for MEAD JOHNSON NUTRITION CO is rather high; currently it is at 65.62%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 15.37% is above that of the industry average.
  • MEAD JOHNSON NUTRITION CO' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, MEAD JOHNSON NUTRITION CO increased its bottom line by earning $2.96 versus $2.47 in the prior year. This year, the market expects an improvement in earnings ($3.26 versus $2.96).
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.

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