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Roof Leaker To Watch: PACCAR (PCAR)

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

  • PCAR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $92.0 million.
  • PCAR has traded 53,716 shares today.
  • PCAR is trading at 273.32 times the normal volume for the stock at this time of day.
  • PCAR 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 PCAR with the Ticky from Trade-Ideas. See the FREE profile for PCAR NOW at Trade-Ideas

More details on PCAR:

PACCAR Inc, together with its subsidiaries, designs, manufactures, and distributes light, medium, and heavy-duty trucks and related aftermarket parts worldwide. The stock currently has a dividend yield of 1.4%. PCAR has a PE ratio of 18.5. Currently there are 3 analysts that rate PACCAR a buy, no analysts rate it a sell, and 12 rate it a hold.

The average volume for PACCAR has been 1.3 million shares per day over the past 30 days. PACCAR has a market cap of $20.1 billion and is part of the consumer goods sector and automotive industry. The stock has a beta of 1.67 and a short float of 2.4% with 4.90 days to cover. Shares are down 4% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates PACCAR as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, growth in earnings per share, increase in net income and good cash flow from operations. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 22.1%. Since the same quarter one year prior, revenues rose by 12.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The strong earnings growth this company has enjoyed -- up -- has apparently played a role in driving up its share price by a solid 26.10%. In addition, the rise in the general market has likely contributed to this stock's strong performance during this past year.Regarding the stock's future course, although almost any stock can fall in a broad market decline, PCAR should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • PACCAR INC has improved earnings per share by 31.8% 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, PACCAR INC increased its bottom line by earning $3.12 versus $2.86 in the prior year. This year, the market expects an improvement in earnings ($3.28 versus $3.12).
  • 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 Machinery industry average. The net income increased by 32.4% when compared to the same quarter one year prior, rising from $233.60 million to $309.40 million.
  • Net operating cash flow has increased to $547.70 million or 15.89% when compared to the same quarter last year. Despite an increase in cash flow, PACCAR INC's cash flow growth rate is still lower than the industry average growth rate of 29.61%.

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