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Verizon Communications (VZ) Showing Signs Of Being A Roof Leaker

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 Verizon Communications (VZ) 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 Verizon Communications as such a stock due to the following factors:

  • VZ has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $402.0 million.
  • VZ has traded 9.6 million shares today.
  • VZ is trading at 6.64 times the normal volume for the stock at this time of day.
  • VZ 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 VZ with the Ticky from Trade-Ideas. See the FREE profile for VZ NOW at Trade-Ideas

More details on VZ:

Verizon Communications Inc., through its subsidiaries, provides communications, information and entertainment products and services to consumers, businesses, and governmental agencies worldwide. The stock currently has a dividend yield of 4.3%. VZ has a PE ratio of 65.3. Currently there are 18 analysts that rate Verizon Communications a buy, no analysts rate it a sell, and 10 rate it a hold.

The average volume for Verizon Communications has been 14.2 million shares per day over the past 30 days. Verizon has a market cap of $142.0 billion and is part of the technology sector and telecommunications industry. The stock has a beta of 0.19 and a short float of 2.4% with 9.65 days to cover. Shares are up 13.8% 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 Verizon Communications as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, good cash flow from operations, expanding profit margins and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:

  • VZ's revenue growth has slightly outpaced the industry average of 3.4%. Since the same quarter one year prior, revenues slightly increased by 4.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Diversified Telecommunication Services industry. The net income increased by 40.1% when compared to the same quarter one year prior, rising from $1,593.00 million to $2,232.00 million.
  • Net operating cash flow has increased to $11,239.00 million or 18.46% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -7.87%.
  • The gross profit margin for VERIZON COMMUNICATIONS INC is rather high; currently it is at 63.80%. 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 7.37% trails the industry average.
  • VERIZON COMMUNICATIONS INC has improved earnings per share by 39.3% in the most recent quarter compared to the same quarter a year ago. 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, VERIZON COMMUNICATIONS INC reported lower earnings of $0.31 versus $0.86 in the prior year. This year, the market expects an improvement in earnings ($2.82 versus $0.31).

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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