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Today's Roof Leaker Stock Is Western Union Company (WU)

Stocks in this article: WU

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 Western Union Company ( WU) 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 Western Union Company as such a stock due to the following factors:

  • WU has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $152.2 million.
  • WU has traded 1.1 million shares today.
  • WU is trading at 1.56 times the normal volume for the stock at this time of day.
  • WU 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 WU with the Ticky from Trade-Ideas. See the FREE profile for WU NOW at Trade-Ideas

More details on WU:

The Western Union Company provides money movement and payment services worldwide. The company operates in three segments: Consumer-to-Consumer, Consumer-to-Business, and Business Solutions. The Consumer-to-Consumer segment offers cash money transfer services involving walk-in agent locations. The stock currently has a dividend yield of 2.9%. WU has a PE ratio of 11.6. Currently there are 5 analysts that rate Western Union Company a buy, 3 analysts rate it a sell, and 13 rate it a hold.

The average volume for Western Union Company has been 6.3 million shares per day over the past 30 days. Western Union has a market cap of $9.6 billion and is part of the financial sector and financial services industry. The stock has a beta of 1.32 and a short float of 7.4% with 4.51 days to cover. Shares are up 22.7% 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 Western Union Company as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.

Highlights from the ratings report include:

  • Compared to its closing price of one year ago, WU's share price has jumped by 37.72%, 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, WU should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Despite the weak revenue results, WU has outperformed against the industry average of 22.6%. Since the same quarter one year prior, revenues slightly dropped by 0.9%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • 47.11% is the gross profit margin for WESTERN UNION CO which we consider to be strong. Regardless of WU's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 15.21% trails the industry average.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the IT Services industry and the overall market, WESTERN UNION CO's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $333.40 million or 19.44% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, WESTERN UNION CO has marginally lower results.

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