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Trade-Ideas: Tesoro Corporation (TSO) 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 Tesoro Corporation (TSO) 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 Tesoro Corporation as such a stock due to the following factors:

  • TSO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $192.2 million.
  • TSO has traded 1.5 million shares today.
  • TSO is trading at 1.94 times the normal volume for the stock at this time of day.
  • TSO 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 TSO with the Ticky from Trade-Ideas. See the FREE profile for TSO NOW at Trade-Ideas

More details on TSO:

Tesoro Corporation, together with its subsidiaries, engages in refining and marketing petroleum products in the United States. It operates in two segments, Refining and Retail. The stock currently has a dividend yield of 2%. TSO has a PE ratio of 15.6. Currently there are 7 analysts that rate Tesoro Corporation a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Tesoro Corporation has been 3.6 million shares per day over the past 30 days. Tesoro has a market cap of $6.7 billion and is part of the basic materials sector and energy industry. The stock has a beta of 2.27 and a short float of 5.4% with 2.01 days to cover. Shares are up 13.7% year to date as of the close of trading on Monday.

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 Tesoro Corporation as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, attractive valuation levels, solid stock price performance 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 greatly exceeded the industry average of 5.5%. Since the same quarter one year prior, revenues rose by 30.2%. 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.
  • TSO's share price has surged by 27.11% over the past year, reflecting the market's general trend, despite their weak earnings growth during the last quarter. Regarding the stock's future course, although almost any stock can fall in a broad market decline, TSO should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • TSO's debt-to-equity ratio of 0.64 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further.
  • TESORO CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, TESORO CORP increased its bottom line by earning $5.18 versus $3.76 in the prior year. For the next year, the market is expecting a contraction of 33.3% in earnings ($3.46 versus $5.18).

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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