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TJX Companies (TJX) Marked As Today's Roof Leaker 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 TJX Companies ( TJX) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified TJX Companies as such a stock due to the following factors:

  • TJX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $166.9 million.
  • TJX has traded 422,755 shares today.
  • TJX is trading at 1.60 times the normal volume for the stock at this time of day.
  • TJX crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

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

More details on TJX:

The TJX Companies, Inc. operates as an off-price apparel and home fashions retailer in the United States and internationally. The company operates in four segments: Marmaxx, HomeGoods, TJX Canada, and TJX Europe. The stock currently has a dividend yield of 0.9%. TJX has a PE ratio of 20.7. Currently there are 9 analysts that rate TJX Companies a buy, no analysts rate it a sell, and 10 rate it a hold.

The average volume for TJX Companies has been 3.9 million shares per day over the past 30 days. TJX Companies has a market cap of $42.4 billion and is part of the services sector and retail industry. The stock has a beta of 0.61 and a short float of 1.3% with 2.98 days to cover. Shares are down 7.6% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates TJX Companies as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:

  • TJX's revenue growth has slightly outpaced the industry average of 6.6%. Since the same quarter one year prior, revenues slightly increased by 1.1%. 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.
  • Compared to its closing price of one year ago, TJX's share price has jumped by 30.70%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, TJX should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • TJX COMPANIES INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, TJX COMPANIES INC increased its bottom line by earning $2.95 versus $2.55 in the prior year. This year, the market expects an improvement in earnings ($3.20 versus $2.95).
  • The current debt-to-equity ratio, 0.30, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.75 is somewhat weak and could be cause for future problems.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Specialty Retail industry and the overall market, TJX COMPANIES INC's return on equity significantly exceeds that of both the industry average and the S&P 500.

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