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ACE (ACE) 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 ACE ( ACE) 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 ACE as such a stock due to the following factors:

  • ACE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $221.6 million.
  • ACE has traded 49,520 shares today.
  • ACE is trading at 3.62 times the normal volume for the stock at this time of day.
  • ACE 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 ACE with the Ticky from Trade-Ideas. See the FREE profile for ACE NOW at Trade-Ideas

More details on ACE:

ACE Limited, through its subsidiaries, provides a range of insurance and reinsurance products to insured's worldwide. The stock currently has a dividend yield of 2.6%. ACE has a PE ratio of 9.4. Currently there are 11 analysts that rate ACE a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for ACE has been 1.4 million shares per day over the past 30 days. ACE has a market cap of $32.8 billion and is part of the financial sector and insurance industry. The stock has a beta of 0.96 and a short float of 1% with 1.48 days to cover. Shares are down 7.3% 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 ACE as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, notable return on equity and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:

  • ACE's revenue growth has slightly outpaced the industry average of 9.1%. Since the same quarter one year prior, revenues slightly increased by 0.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Although ACE's debt-to-equity ratio of 0.21 is very low, it is currently higher than that of the industry average.
  • ACE LTD has improved earnings per share by 43.0% 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, ACE LTD increased its bottom line by earning $7.88 versus $4.51 in the prior year. This year, the market expects an improvement in earnings ($8.95 versus $7.88).
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • 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 Insurance industry and the overall market on the basis of return on equity, ACE LTD has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.

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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