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AOL (AOL) Is Water-Logged And Getting Wetter Today

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 AOL ( AOL) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified AOL as such a stock due to the following factors:

  • AOL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $41.1 million.
  • AOL has traded 1.2 million shares today.
  • AOL traded in a range 265.3% of the normal price range with a price range of $3.21.
  • AOL traded below its daily resistance level (quality: 186 days, meaning that the stock is crossing a resistance level set by the last 186 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on AOL:

AOL Inc. provides various digital brands, products and services to consumers, advertisers, publishers and subscribers worldwide. AOL has a PE ratio of 38.5. Currently there are 7 analysts that rate AOL a buy, 1 analyst rates it a sell, and 6 rate it a hold.

The average volume for AOL has been 1.4 million shares per day over the past 30 days. AOL has a market cap of $3.5 billion and is part of the technology sector and internet industry. The stock has a beta of 1.24 and a short float of 10% with 5.37 days to cover. Shares are down 5.8% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates AOL 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, reasonable valuation levels, good cash flow from operations and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 20.6%. Since the same quarter one year prior, revenues rose by 13.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Although AOL's debt-to-equity ratio of 0.05 is very low, it is currently higher than that of the industry average. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.27, which illustrates the ability to avoid short-term cash problems.
  • Net operating cash flow has increased to $90.00 million or 17.34% when compared to the same quarter last year. Despite an increase in cash flow, AOL INC's average is still marginally south of the industry average growth rate of 22.53%.
  • AOL INC's earnings per share improvement from the most recent quarter was slightly positive. 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, AOL INC reported lower earnings of $1.12 versus $11.02 in the prior year. This year, the market expects an improvement in earnings ($2.27 versus $1.12).

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