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ADT Corporation (ADT) Highlighted As Today's Perilous Reversal 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 ADT Corporation ( ADT) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified ADT Corporation as such a stock due to the following factors:

  • ADT has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $316.2 million.
  • ADT has traded 93,009 shares today.
  • ADT is down 3.4% today.
  • ADT was up 5.2% yesterday.

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More details on ADT:

The ADT Corporation provides electronic security, interactive home and business automation, and related monitoring services under the ADT, ADT Pulse, and Companion Service brands to residential and small business customers in the United States and Canada. The stock currently has a dividend yield of 2.7%. ADT has a PE ratio of 16.2. Currently there is 1 analyst that rates ADT Corporation a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for ADT Corporation has been 4.3 million shares per day over the past 30 days. ADT has a market cap of $5.5 billion and is part of the services sector and diversified services industry. Shares are down 26% year-to-date as of the close of trading on Thursday.

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 ADT Corporation as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 6.4%. Since the same quarter one year prior, revenues slightly increased by 3.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • When compared to other companies in the Commercial Services & Supplies industry and the overall market, ADT CORP (THE)'s return on equity has significantly outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • ADT CORP (THE)'s earnings per share declined by 11.4% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ADT CORP (THE) increased its bottom line by earning $1.88 versus $0.40 in the prior year. This year, the market expects an improvement in earnings ($1.96 versus $1.88).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Commercial Services & Supplies industry. The net income has significantly decreased by 26.7% when compared to the same quarter one year ago, falling from $105.00 million to $77.00 million.
  • Net operating cash flow has decreased to $335.00 million or 18.09% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

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