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Rock-Tenn Company (RKT) Is Today's Storm The Castle 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 Rock-Tenn Company ( RKT) 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 Rock-Tenn Company as such a stock due to the following factors:

  • RKT has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $124.6 million.
  • RKT has traded 198,159 shares today.
  • RKT is trading at 1.89 times the normal volume for the stock at this time of day.
  • RKT 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.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in RKT with the Ticky from Trade-Ideas. See the FREE profile for RKT NOW at Trade-Ideas

More details on RKT:

Rock-Tenn Company manufactures and sells corrugated and consumer packaging products in the United States, Canada, Mexico, Chile, Argentina, Puerto Rico, and China. The company operates in three segments: Corrugated Packaging, Consumer Packaging, and Recycling. The stock currently has a dividend yield of 1.4%. RKT has a PE ratio of 9.8. Currently there are 7 analysts that rate Rock-Tenn Company a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for Rock-Tenn Company has been 769,700 shares per day over the past 30 days. Rock-Tenn has a market cap of $7.2 billion and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 1.78 and a short float of 1.2% with 0.61 days to cover. Shares are down 3.1% 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 Rock-Tenn Company as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, attractive valuation levels, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:

  • RKT's revenue growth has slightly outpaced the industry average of 2.7%. Since the same quarter one year prior, revenues slightly increased by 3.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • Net operating cash flow has slightly increased to $304.50 million or 9.72% when compared to the same quarter last year. In addition, ROCK-TENN CO has also modestly surpassed the industry average cash flow growth rate of 3.43%.
  • The debt-to-equity ratio is somewhat low, currently at 0.63, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.90 is somewhat weak and could be cause for future problems.

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