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Trade-Ideas: Alliant Techsystems (ATK) Is 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 Alliant Techsystems ( ATK) 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 Alliant Techsystems as such a stock due to the following factors:

  • ATK has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $57.4 million.
  • ATK has traded 274,266 shares today.
  • ATK is trading at 2.22 times the normal volume for the stock at this time of day.
  • ATK 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 ATK with the Ticky from Trade-Ideas. See the FREE profile for ATK NOW at Trade-Ideas

More details on ATK:

Alliant Techsystems Inc. engages in the provision of aerospace, defense, and commercial products to the U.S. government, allied nations, and prime contractors. The company also supplies ammunition and related accessories to law enforcement agencies and commercial customers. The stock currently has a dividend yield of 1%. ATK has a PE ratio of 12.6. Currently there are 4 analysts that rate Alliant Techsystems a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for Alliant Techsystems has been 384,500 shares per day over the past 30 days. Alliant Techsystems has a market cap of $4.2 billion and is part of the industrial goods sector and aerospace/defense industry. The stock has a beta of 0.57 and a short float of 4.9% with 2.78 days to cover. Shares are up 2.2% 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 Alliant Techsystems as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels, solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 3.2%. Since the same quarter one year prior, revenues rose by 14.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 30.04% and other important driving factors, this stock has surged by 73.28% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, ATK should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • ALLIANT TECHSYSTEMS INC has improved earnings per share by 30.0% 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, ALLIANT TECHSYSTEMS INC increased its bottom line by earning $10.46 versus $8.32 in the prior year. This year, the market expects an improvement in earnings ($11.31 versus $10.46).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the Aerospace & Defense industry average, but is less than that of the S&P 500. The net income increased by 32.0% when compared to the same quarter one year prior, rising from $72.74 million to $96.00 million.

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