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AutoZone (AZO) Shows Signs Of Being Water-Logged And Getting Wetter

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 AutoZone ( AZO) 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 AutoZone as such a stock due to the following factors:

  • AZO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $118.5 million.
  • AZO has traded 266,656 shares today.
  • AZO traded in a range 200.6% of the normal price range with a price range of $18.83.
  • AZO traded below its daily resistance level (quality: 6 days, meaning that the stock is crossing a resistance level set by the last 6 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.

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

More details on AZO:

AutoZone, Inc. is engaged in retailing and distributing automotive replacement parts and accessories. AZO has a PE ratio of 18.4. Currently there are 6 analysts that rate AutoZone a buy, no analysts rate it a sell, and 9 rate it a hold.

The average volume for AutoZone has been 260,500 shares per day over the past 30 days. AutoZone has a market cap of $18.0 billion and is part of the services sector and retail industry. The stock has a beta of 0.20 and a short float of 5.1% with 7.72 days to cover. Shares are up 13.2% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates AutoZone as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, solid stock price performance, impressive record of earnings per share growth and increase in net income. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 3.4%. Since the same quarter one year prior, revenues slightly increased by 7.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The gross profit margin for AUTOZONE INC is rather high; currently it is at 55.03%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 9.68% is above that of the industry average.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 29.67% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, AZO should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • AUTOZONE INC has improved earnings per share by 17.8% 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, AUTOZONE INC increased its bottom line by earning $27.88 versus $23.57 in the prior year. This year, the market expects an improvement in earnings ($31.52 versus $27.88).
  • The net income growth from the same quarter one year ago has exceeded that of the Specialty Retail industry average, but is less than that of the S&P 500. The net income increased by 9.4% when compared to the same quarter one year prior, going from $176.25 million to $192.83 million.

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