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Trade-Ideas: Michael Kors Holdings (KORS) Is Today's "Water-Logged And Getting Wetter" 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 Michael Kors Holdings (KORS) 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 Michael Kors Holdings as such a stock due to the following factors:

  • KORS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $275.9 million.
  • KORS has traded 689,762 shares today.
  • KORS traded in a range 204.4% of the normal price range with a price range of $3.68.
  • KORS traded below its daily resistance level (quality: 12 days, meaning that the stock is crossing a resistance level set by the last 12 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 KORS:

Michael Kors Holdings Limited engages in the design, marketing, distribution, and retailing of branded women's apparel and accessories, and men's apparel. The company operates in three segments: Retail, Wholesale, and Licensing. KORS has a PE ratio of 34.1. Currently there are 10 analysts that rate Michael Kors Holdings a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for Michael Kors Holdings has been 4.1 million shares per day over the past 30 days. Michael Kors has a market cap of $17.1 billion and is part of the services sector and specialty retail industry. Shares are up 64.5% 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 Michael Kors Holdings as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and impressive record of earnings per share growth. 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:

  • The revenue growth greatly exceeded the industry average of 8.7%. Since the same quarter one year prior, revenues rose by 38.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • KORS has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.89, which clearly demonstrates the ability to cover short-term cash needs.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Textiles, Apparel & Luxury Goods industry and the overall market, MICHAEL KORS HOLDINGS LTD's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • MICHAEL KORS HOLDINGS LTD has improved earnings per share by 44.9% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, MICHAEL KORS HOLDINGS LTD increased its bottom line by earning $1.97 versus $0.42 in the prior year. This year, the market expects an improvement in earnings ($2.82 versus $1.97).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Textiles, Apparel & Luxury Goods industry. The net income increased by 49.0% when compared to the same quarter one year prior, rising from $97.83 million to $145.81 million.

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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