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Water-Logged And Getting Wetter Stock Of The Day: Joy Global (JOY)

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 Joy Global ( JOY) 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 Joy Global as such a stock due to the following factors:

  • JOY has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $49.2 million.
  • JOY has traded 699,230 shares today.
  • JOY traded in a range 202.3% of the normal price range with a price range of $1.85.
  • JOY traded below its daily resistance level (quality: 47 days, meaning that the stock is crossing a resistance level set by the last 47 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 JOY:

Joy Global Inc. manufactures and services mining equipment for the extraction of coal, copper, iron ore, oil sands, gold, and other minerals. It operates in two segments, Underground Mining Machinery and Surface Mining Equipment. The stock currently has a dividend yield of 1.2%. JOY has a PE ratio of 14.4. Currently there are 8 analysts that rate Joy Global a buy, no analysts rate it a sell, and 10 rate it a hold.

The average volume for Joy Global has been 1.5 million shares per day over the past 30 days. Joy Global has a market cap of $6.0 billion and is part of the industrial goods sector and industrial industry. The stock has a beta of 2.11 and a short float of 21.6% with 25.44 days to cover. Shares are up 1.6% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Joy Global as a buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.

Highlights from the ratings report include:

  • The current debt-to-equity ratio, 0.48, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.00, which illustrates the ability to avoid short-term cash problems.
  • JOY, with its decline in revenue, underperformed when compared the industry average of 2.0%. Since the same quarter one year prior, revenues fell by 27.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 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 Machinery industry and the overall market on the basis of return on equity, JOY GLOBAL INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • In its most recent trading session, JOY has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.

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