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Ingersoll-Rand (IR) Roof Leaking Today

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 Ingersoll-Rand ( IR) 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 Ingersoll-Rand as such a stock due to the following factors:

  • IR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $170.2 million.
  • IR has traded 1.3 million shares today.
  • IR is trading at 5.30 times the normal volume for the stock at this time of day.
  • IR 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 IR with the Ticky from Trade-Ideas. See the FREE profile for IR NOW at Trade-Ideas

More details on IR:

Ingersoll-Rand plc engages in the design, manufacture, sale, and service of a diverse portfolio of industrial and commercial products in the United States and internationally. The stock currently has a dividend yield of 1.2%. IR has a PE ratio of 26.3. Currently there are 4 analysts that rate Ingersoll-Rand a buy, no analysts rate it a sell, and 8 rate it a hold.

The average volume for Ingersoll-Rand has been 2.0 million shares per day over the past 30 days. Ingersoll-Rand has a market cap of $20.5 billion and is part of the industrial goods sector and industrial industry. The stock has a beta of 1.52 and a short float of 0.9% with 0.97 days to cover. Shares are up 48.3% year to date as of the close of trading on Wednesday.

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 Ingersoll-Rand as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. 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 21.5%. Since the same quarter one year prior, revenues slightly increased by 4.4%. 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.
  • 35.72% is the gross profit margin for INGERSOLL-RAND PLC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 4.42% trails the industry average.
  • Net operating cash flow has increased to $522.30 million or 21.49% when compared to the same quarter last year. Despite an increase in cash flow, INGERSOLL-RAND PLC's cash flow growth rate is still lower than the industry average growth rate of 34.67%.
  • The current debt-to-equity ratio, 0.50, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.92 is somewhat weak and could be cause for future problems.
  • Compared to its closing price of one year ago, IR's share price has jumped by 48.86%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp 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 other strengths this company displays justify these higher price levels.

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