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

  • NUE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $122.4 million.
  • NUE has traded 63,709 shares today.
  • NUE is trading at 5.56 times the normal volume for the stock at this time of day.
  • NUE 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 NUE with the Ticky from Trade-Ideas. See the FREE profile for NUE NOW at Trade-Ideas

More details on NUE:

Nucor Corporation, together with its subsidiaries, engages in the manufacture and sale of steel and steel products in North America and internationally. It operates through three segments: Steel Mills, Steel Products, and Raw Materials. The stock currently has a dividend yield of 3%. NUE has a PE ratio of 32.2. Currently there are 7 analysts that rate Nucor a buy, 1 analyst rates it a sell, and 6 rate it a hold.

The average volume for Nucor has been 1.7 million shares per day over the past 30 days. Nucor has a market cap of $15.6 billion and is part of the basic materials sector and metals & mining industry. The stock has a beta of 1.54 and a short float of 2.5% with 3.13 days to cover. Shares are down 9.3% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Nucor as a buy. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:

  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Metals & Mining industry average. The net income increased by 33.8% when compared to the same quarter one year prior, rising from $110.31 million to $147.60 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 3.2%. Since the same quarter one year prior, revenues slightly increased by 2.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Despite currently having a low debt-to-equity ratio of 0.58, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that NUE's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.85 is high and demonstrates strong liquidity.
  • NUCOR CORP has improved earnings per share by 31.4% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, NUCOR CORP reported lower earnings of $1.59 versus $2.44 in the prior year. For the next year, the market is expecting a contraction of 13.2% in earnings ($1.38 versus $1.59).
  • In its most recent trading session, NUE has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

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