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Trade-Ideas: Williams-Sonoma (WSM) 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 Williams-Sonoma ( WSM) 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 Williams-Sonoma as such a stock due to the following factors:

  • WSM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $52.7 million.
  • WSM has traded 171,569 shares today.
  • WSM is trading at 1.57 times the normal volume for the stock at this time of day.
  • WSM 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 WSM with the Ticky from Trade-Ideas. See the FREE profile for WSM NOW at Trade-Ideas

More details on WSM:

Williams-Sonoma Inc. operates as a multi-channel specialty retailer of home products. It operates in two segments, Direct-to-Customer and Retail. The stock currently has a dividend yield of 2.2%. WSM has a PE ratio of 56.5. Currently there are 6 analysts that rate Williams-Sonoma a buy, no analysts rate it a sell, and 13 rate it a hold.

The average volume for Williams-Sonoma has been 1.1 million shares per day over the past 30 days. Williams-Sonoma has a market cap of $5.2 billion and is part of the services sector and retail industry. The stock has a beta of 1.31 and a short float of 7.3% with 7.53 days to cover. Shares are down 5.2% year-to-date as of the close of trading on Tuesday.

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 Williams-Sonoma as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in stock price during the past year, impressive record of earnings per share growth, notable return on equity and good cash flow from operations. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:

  • WSM's revenue growth has slightly outpaced the industry average of 6.8%. Since the same quarter one year prior, revenues rose by 11.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. 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.
  • WILLIAMS-SONOMA INC has improved earnings per share by 18.4% 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, WILLIAMS-SONOMA INC increased its bottom line by earning $2.56 versus $2.24 in the prior year. This year, the market expects an improvement in earnings ($2.83 versus $2.56).
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Specialty Retail industry and the overall market, WILLIAMS-SONOMA INC's return on equity exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly increased by 257.81% to $84.61 million when compared to the same quarter last year. In addition, WILLIAMS-SONOMA INC has also vastly surpassed the industry average cash flow growth rate of -5.07%.

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