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Nucor (NUE) Marked As 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 Nucor ( NUE) 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 Nucor as such a stock due to the following factors:

  • NUE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $65.9 million.
  • NUE has traded 1.1 million shares today.
  • NUE is trading at 7.33 times the normal volume for the stock at this time of day.
  • NUE 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 NUE with the Ticky from Trade-Ideas. See the FREE profile for NUE NOW at Trade-Ideas

More details on NUE:

Nucor Corporation, together with its subsidiaries, manufactures and sells steel and steel products in North America and internationally. It operates through three segments: Steel Mills, Steel Products, and Raw Materials. The stock currently has a dividend yield of 2.9%. NUE has a PE ratio of 32.3. Currently there are 7 analysts that rate Nucor a buy, 1 analyst rates it a sell, and 5 rate it a hold.

The average volume for Nucor has been 1.6 million shares per day over the past 30 days. Nucor has a market cap of $16.5 billion and is part of the basic materials sector and metals & mining industry. The stock has a beta of 1.42 and a short float of 2.8% with 6.21 days to cover. Shares are down 3.2% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Nucor as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, impressive record of earnings per share growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:

  • NUE's revenue growth has slightly outpaced the industry average of 4.3%. Since the same quarter one year prior, revenues rose by 12.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Net operating cash flow has increased to $149.21 million or 15.83% when compared to the same quarter last year. In addition, NUCOR CORP has also vastly surpassed the industry average cash flow growth rate of -37.81%.
  • NUCOR CORP has improved earnings per share by 34.6% in the most recent quarter compared to the same quarter a year ago. 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, NUCOR CORP reported lower earnings of $1.52 versus $1.59 in the prior year. This year, the market expects an improvement in earnings ($2.31 versus $1.52).
  • Despite currently having a low debt-to-equity ratio of 0.58, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that NUE's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.69 is high and demonstrates strong liquidity.
  • 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 Metals & Mining industry and the overall market on the basis of return on equity, NUCOR CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.

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