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GNC Holdings (GNC) Spotted As Roof Leaker 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 GNC Holdings (GNC) 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 GNC Holdings as such a stock due to the following factors:

  • GNC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $88.8 million.
  • GNC has traded 70,201 shares today.
  • GNC is trading at 11.25 times the normal volume for the stock at this time of day.
  • GNC 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 GNC with the Ticky from Trade-Ideas. See the FREE profile for GNC NOW at Trade-Ideas

More details on GNC:

GNC Holdings, Inc. operates as a specialty retailer of health and wellness products. It operates through three segments: Retail, Franchise, and Manufacturing/Wholesale. The stock currently has a dividend yield of 1.1%. GNC has a PE ratio of 19.7. Currently there are 9 analysts that rate GNC Holdings a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for GNC Holdings has been 1.1 million shares per day over the past 30 days. GNC has a market cap of $5.0 billion and is part of the services sector and retail industry. The stock has a beta of 1.26 and a short float of 3% with 1.51 days to cover. Shares are down 10.1% year-to-date as of the close of trading on Tuesday.

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 GNC Holdings as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, solid stock price performance, impressive record of earnings per share growth and good cash flow from operations. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:

  • GNC's revenue growth has slightly outpaced the industry average of 7.7%. Since the same quarter one year prior, revenues slightly increased by 8.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 26.66% and other important driving factors, this stock has surged by 47.25% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, GNC should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • GNC HOLDINGS INC has improved earnings per share by 26.7% 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, GNC HOLDINGS INC increased its bottom line by earning $2.29 versus $1.18 in the prior year. This year, the market expects an improvement in earnings ($2.87 versus $2.29).
  • 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. When compared to other companies in the Specialty Retail industry and the overall market, GNC HOLDINGS INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • Net operating cash flow has significantly increased by 80.40% to $88.55 million when compared to the same quarter last year. In addition, GNC HOLDINGS INC has also vastly surpassed the industry average cash flow growth rate of 3.70%.

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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