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W.W. Grainger (GWW) Highlighted As 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 W.W. Grainger ( GWW) 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 W.W. Grainger as such a stock due to the following factors:

  • GWW has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $119.3 million.
  • GWW has traded 347,980 shares today.
  • GWW is trading at 1.64 times the normal volume for the stock at this time of day.
  • GWW 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 GWW:

W.W. Grainger, Inc. operates as a distributor of maintenance, repair, and operating (MRO) supplies; and other related products and services that are used by businesses and institutions in the United States and Canada. The stock currently has a dividend yield of 1.5%. GWW has a PE ratio of 22.7. Currently there are 8 analysts that rate W.W. Grainger a buy, no analysts rate it a sell, and 7 rate it a hold.

The average volume for W.W. Grainger has been 548,400 shares per day over the past 30 days. W.W. Grainger has a market cap of $16.9 billion and is part of the services sector and wholesale industry. The stock has a beta of 0.92 and a short float of 3.8% with 4.83 days to cover. Shares are down 0.8% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates W.W. Grainger as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, increase in stock price during the past year and growth in earnings per share. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the ratings report include:

  • GWW's revenue growth has slightly outpaced the industry average of 6.4%. Since the same quarter one year prior, revenues slightly increased by 6.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • GWW's debt-to-equity ratio is very low at 0.17 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.28, which illustrates the ability to avoid short-term cash problems.
  • 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. When compared to other companies in the Trading Companies & Distributors industry and the overall market, GRAINGER (W W) INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • 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.
  • GRAINGER (W W) INC's earnings per share improvement from the most recent quarter was slightly positive. 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, GRAINGER (W W) INC increased its bottom line by earning $11.12 versus $9.52 in the prior year. This year, the market expects an improvement in earnings ($12.62 versus $11.12).

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