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Trade-Ideas: Michael Kors Holdings (KORS) Is Today's "Water-Logged And Getting Wetter" 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 Michael Kors Holdings ( KORS) 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 Michael Kors Holdings as such a stock due to the following factors:

  • KORS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $311.8 million.
  • KORS has traded 3.6 million shares today.
  • KORS traded in a range 200.9% of the normal price range with a price range of $5.35.
  • KORS traded below its daily resistance level (quality: 8 days, meaning that the stock is crossing a resistance level set by the last 8 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 KORS with the Ticky from Trade-Ideas. See the FREE profile for KORS NOW at Trade-Ideas

More details on KORS:

Michael Kors Holdings Limited engages in the design, marketing, distribution, and retailing of branded women's apparel and accessories, and men's apparel. The company operates in three segments: Retail, Wholesale, and Licensing. KORS has a PE ratio of 32.7. Currently there are 10 analysts that rate Michael Kors Holdings a buy, 2 analysts rate it a sell, and 3 rate it a hold.

The average volume for Michael Kors Holdings has been 2.3 million shares per day over the past 30 days. Michael Kors has a market cap of $19.5 billion and is part of the services sector and specialty retail industry. The stock has a beta of 1.90 and a short float of 3.4% with 1.84 days to cover. Shares are up 19.5% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Michael Kors Holdings as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and good cash flow from operations. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:

  • KORS's very impressive revenue growth greatly exceeded the industry average of 17.5%. Since the same quarter one year prior, revenues leaped by 59.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • KORS has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 4.07, which clearly demonstrates the ability to cover short-term cash needs.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Textiles, Apparel & Luxury Goods industry and the overall market, MICHAEL KORS HOLDINGS LTD's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for MICHAEL KORS HOLDINGS LTD is rather high; currently it is at 61.20%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 22.68% significantly outperformed against the industry average.
  • Net operating cash flow has significantly increased by 98.06% to $268.36 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 65.01%.

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