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Storm The Castle: JDS Uniphase Corp (CA (JDSU)

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 JDS Uniphase Corp (CA ( JDSU) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified JDS Uniphase Corp (CA as such a stock due to the following factors:

  • JDSU has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $66.7 million.
  • JDSU has traded 760,143 shares today.
  • JDSU is trading at 118.86 times the normal volume for the stock at this time of day.
  • JDSU crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on JDSU:

JDS Uniphase Corporation provides communications test and measurement solutions, and optical products for telecommunications service providers, wireless operators, cable operators, network-equipment manufacturers, and enterprises worldwide. JDSU has a PE ratio of 42.5. Currently there are 7 analysts that rate JDS Uniphase Corp (CA a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for JDS Uniphase Corp (CA has been 4.9 million shares per day over the past 30 days. JDS Uniphase Corp (CA has a market cap of $2.7 billion and is part of the technology sector and telecommunications industry. The stock has a beta of 2.56 and a short float of 5.8% with 2.06 days to cover. Shares are down 8.4% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates JDS Uniphase Corp (CA as a buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth, expanding profit margins, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:

  • JDS UNIPHASE CORP reported significant earnings per share improvement 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, JDS UNIPHASE CORP turned its bottom line around by earning $0.24 versus -$0.11 in the prior year. This year, the market expects an improvement in earnings ($0.59 versus $0.24).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Communications Equipment industry. The net income increased by 102.6% when compared to the same quarter one year prior, rising from -$11.60 million to $0.30 million.
  • JDSU's revenue growth trails the industry average of 23.6%. Since the same quarter one year prior, revenues slightly increased by 1.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • 49.86% is the gross profit margin for JDS UNIPHASE CORP which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, JDSU's net profit margin of 0.06% significantly trails the industry average.
  • Despite currently having a low debt-to-equity ratio of 0.43, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 3.92 is very high and demonstrates very strong liquidity.

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