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Mead Johnson Nutrition Company (MJN) 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 Mead Johnson Nutrition Company ( MJN) 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 Mead Johnson Nutrition Company as such a stock due to the following factors:

  • MJN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $218.4 million.
  • MJN has traded 3.7 million shares today.
  • MJN is trading at 2.17 times the normal volume for the stock at this time of day.
  • MJN 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.

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More details on MJN:

Mead Johnson is a subsidiary of Bristol-Myers Squibb Co., see separate record. The stock currently has a dividend yield of 1.8%. MJN has a PE ratio of 23.0. Currently there are 7 analysts that rate Mead Johnson Nutrition Company a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Mead Johnson Nutrition Company has been 1.7 million shares per day over the past 30 days. Mead Johnson Nutrition has a market cap of $15.7 billion and is part of the consumer goods sector and food & beverage industry. The stock has a beta of 0.72 and a short float of 2.1% with 1.40 days to cover. Shares are down 7.3% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Mead Johnson Nutrition Company as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, expanding profit margins, increase in net income and notable return on equity. 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:

  • MJN's revenue growth has slightly outpaced the industry average of 0.0%. Since the same quarter one year prior, revenues slightly increased by 8.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • MEAD JOHNSON NUTRITION CO has improved earnings per share by 13.6% 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, MEAD JOHNSON NUTRITION CO increased its bottom line by earning $3.19 versus $2.96 in the prior year. This year, the market expects an improvement in earnings ($3.61 versus $3.19).
  • The gross profit margin for MEAD JOHNSON NUTRITION CO is rather high; currently it is at 65.02%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 14.44% is above that of the industry average.
  • The net income growth from the same quarter one year ago has exceeded that of the Food Products industry average, but is less than that of the S&P 500. The net income increased by 14.2% when compared to the same quarter one year prior, going from $134.20 million to $153.20 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Food Products industry and the overall market, MEAD JOHNSON NUTRITION CO's return on equity significantly exceeds that of both the industry average and the S&P 500.

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