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Lam Research Corporation (LRCX) 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 Lam Research Corporation ( LRCX) 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 Lam Research Corporation as such a stock due to the following factors:

  • LRCX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $153.0 million.
  • LRCX has traded 778,499 shares today.
  • LRCX is trading at 4.00 times the normal volume for the stock at this time of day.
  • LRCX 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 LRCX with the Ticky from Trade-Ideas. See the FREE profile for LRCX NOW at Trade-Ideas

More details on LRCX:

Lam Research Corporation designs, manufactures, markets, refurbishes, and services semiconductor processing equipment used in the fabrication of integrated circuits. The company offers plasma etch products that remove materials from the wafer to create the features and patterns of a device. LRCX has a PE ratio of 25.9. Currently there are 12 analysts that rate Lam Research Corporation a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Lam Research Corporation has been 1.8 million shares per day over the past 30 days. Lam Research has a market cap of $8.3 billion and is part of the technology sector and electronics industry. The stock has a beta of 1.23 and a short float of 5% with 2.32 days to cover. Shares are down 7% year-to-date as of the close of trading on Friday.

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 Lam Research Corporation as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, attractive valuation levels and compelling growth in net income. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 4.4%. Since the same quarter one year prior, revenues rose by 29.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Although LRCX's debt-to-equity ratio of 0.17 is very low, it is currently higher than that of the industry average. To add to this, LRCX has a quick ratio of 2.25, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 2225.1% when compared to the same quarter one year prior, rising from $6.41 million to $148.99 million.

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