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State Street (STT) 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 State Street ( STT) 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 State Street as such a stock due to the following factors:

  • STT has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $125.5 million.
  • STT has traded 54,935 shares today.
  • STT is trading at 4.51 times the normal volume for the stock at this time of day.
  • STT 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 STT with the Ticky from Trade-Ideas. See the FREE profile for STT NOW at Trade-Ideas

More details on STT:

State Street Corporation, a financial holding company, provides investment servicing and investment management services to institutional investors worldwide. The stock currently has a dividend yield of 1.4%. STT has a PE ratio of 16.8. Currently there are 11 analysts that rate State Street a buy, 1 analyst rates it a sell, and 5 rate it a hold.

The average volume for State Street has been 1.9 million shares per day over the past 30 days. State Street has a market cap of $32.6 billion and is part of the financial sector and financial services industry. The stock has a beta of 1.68 and a short float of 0.7% with 1.81 days to cover. Shares are up 2.4% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates State Street as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, attractive valuation levels, expanding profit margins and good cash flow from operations. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • STT's revenue growth has slightly outpaced the industry average of 1.3%. Since the same quarter one year prior, revenues slightly increased by 2.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, STT's share price has jumped by 47.88%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, STT should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The gross profit margin for STATE STREET CORP is currently very high, coming in at 96.15%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 21.41% is above that of the industry average.
  • Net operating cash flow has slightly increased to $1,097.00 million or 4.97% when compared to the same quarter last year. Despite an increase in cash flow of 4.97%, STATE STREET CORP is still growing at a significantly lower rate than the industry average of 460.58%.

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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