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Trade-Ideas: Fossil Group (FOSL) Is Today's "Roof Leaker" 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 Fossil Group ( FOSL) 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 Fossil Group as such a stock due to the following factors:

  • FOSL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $113.3 million.
  • FOSL has traded 34,344 shares today.
  • FOSL is trading at 15.37 times the normal volume for the stock at this time of day.
  • FOSL 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 FOSL with the Ticky from Trade-Ideas. See the FREE profile for FOSL NOW at Trade-Ideas

More details on FOSL:

Fossil Group, Inc., together with its subsidiaries, engages in the design, development, marketing, and distribution of consumer fashion accessories worldwide. It operates in four segments: North America Wholesale, Europe Wholesale, Asia Pacific Wholesale, and Direct to Consumer. Currently there are 5 analysts that rate Fossil Group a buy, 3 analysts rate it a sell, and 5 rate it a hold.

The average volume for Fossil Group has been 880,400 shares per day over the past 30 days. Fossil Group has a market cap of $6.3 billion and is part of the consumer goods sector and consumer durables industry. The stock has a beta of 2.41 and a short float of 11.6% with 4.24 days to cover.

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 Fossil Group as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, notable return on equity, expanding profit margins 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:

  • FOSL's revenue growth has slightly outpaced the industry average of 17.6%. Since the same quarter one year prior, revenues rose by 18.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • FOSSIL GROUP INC has improved earnings per share by 25.4% 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, FOSSIL GROUP INC increased its bottom line by earning $5.62 versus $4.62 in the prior year. This year, the market expects an improvement in earnings ($6.34 versus $5.62).
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Textiles, Apparel & Luxury Goods industry and the overall market, FOSSIL GROUP INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for FOSSIL GROUP INC is rather high; currently it is at 59.96%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 11.07% is above that of the industry average.
  • 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.

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