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Trade-Ideas: Cooper Companies (COO) 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 Cooper Companies ( COO) 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 Cooper Companies as such a stock due to the following factors:

  • COO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $53.5 million.
  • COO has traded 367,555 shares today.
  • COO is trading at 14.63 times the normal volume for the stock at this time of day.
  • COO 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 COO with the Ticky from Trade-Ideas. See the FREE profile for COO NOW at Trade-Ideas

More details on COO:

The Cooper Companies, Inc. operates as a medical device company worldwide. The stock currently has a dividend yield of 0.1%. COO has a PE ratio of 22.1. Currently there are 7 analysts that rate Cooper Companies a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Cooper Companies has been 423,900 shares per day over the past 30 days. Cooper Companies has a market cap of $6.3 billion and is part of the health care sector and health services industry. The stock has a beta of -0.08 and a short float of 6.6% with 6.36 days to cover. Shares are up 5.9% year-to-date as of the close of trading on Thursday.

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 Cooper Companies as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the ratings report include:

  • COO's revenue growth has slightly outpaced the industry average of 3.3%. Since the same quarter one year prior, revenues slightly increased by 6.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The gross profit margin for COOPER COMPANIES INC is currently very high, coming in at 70.82%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 17.73% is above that of the industry average.
  • Net operating cash flow has increased to $68.57 million or 43.99% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 7.62%.
  • COOPER COMPANIES INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, COOPER COMPANIES INC increased its bottom line by earning $5.96 versus $5.06 in the prior year. This year, the market expects an improvement in earnings ($6.84 versus $5.96).
  • COO's debt-to-equity ratio is very low at 0.14 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.98 is somewhat weak and could be cause for future problems.

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