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Copa Holdings (CPA) Shows Signs Of Being Water-Logged And Getting Wetter

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 Copa Holdings ( CPA) 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 Copa Holdings as such a stock due to the following factors:

  • CPA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $46.7 million.
  • CPA has traded 407,601 shares today.
  • CPA traded in a range 228.7% of the normal price range with a price range of $6.71.
  • CPA traded below its daily resistance level (quality: 36 days, meaning that the stock is crossing a resistance level set by the last 36 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 CPA:

Copa Holdings, S.A. provides airline passenger and cargo services in Latin America. It provides services within Colombia; and international flights from various cities in Colombia to Panama, Venezuela, Ecuador, Mexico, Cuba, Guatemala, and Costa Rica. The stock currently has a dividend yield of 1.9%. CPA has a PE ratio of 20.0. Currently there are 8 analysts that rate Copa Holdings a buy, 1 analyst rates it a sell, and none rate it a hold.

The average volume for Copa Holdings has been 280,300 shares per day over the past 30 days. Copa has a market cap of $5.2 billion and is part of the services sector and transportation industry. The stock has a beta of 0.76 and a short float of 0.7% with 0.73 days to cover. Shares are down 1.1% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Copa Holdings as a buy. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and increase in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:

  • COPA HOLDINGS SA has improved earnings per share by 12.7% 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 two years. We feel that this trend should continue. During the past fiscal year, COPA HOLDINGS SA increased its bottom line by earning $7.35 versus $7.02 in the prior year. This year, the market expects an improvement in earnings ($9.78 versus $7.35).
  • Despite its growing revenue, the company underperformed as compared with the industry average of 15.1%. Since the same quarter one year prior, revenues rose by 14.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.61, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.15, which illustrates the ability to avoid short-term cash problems.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 59.08% over the past year, a rise that has exceeded that of the S&P 500 Index. 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.
  • The company, on the basis of net income growth from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Airlines industry average. The net income increased by 12.6% when compared to the same quarter one year prior, going from $111.92 million to $126.01 million.

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