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Harley-Davidson (HOG) 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 Harley-Davidson (HOG) 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 Harley-Davidson as such a stock due to the following factors:

  • HOG has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $115.4 million.
  • HOG has traded 153,040 shares today.
  • HOG is trading at 2.10 times the normal volume for the stock at this time of day.
  • HOG 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 HOG with the Ticky from Trade-Ideas. See the FREE profile for HOG NOW at Trade-Ideas

More details on HOG:

Harley-Davidson, Inc. manufactures cruiser and touring motorcycles. The company operates in two segments, Motorcycles & Related Products and Financial Services. The stock currently has a dividend yield of 1.6%. HOG has a PE ratio of 19.5. Currently there are 6 analysts that rate Harley-Davidson a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for Harley-Davidson has been 1.5 million shares per day over the past 30 days. Harley-Davidson has a market cap of $14.9 billion and is part of the consumer goods sector and automotive industry. The stock has a beta of 1.04 and a short float of 4.2% with 5.56 days to cover. Shares are down 0.3% year-to-date as of the close of trading on Wednesday.

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 Harley-Davidson as a buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, revenue growth, good cash flow from operations, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.

Highlights from the ratings report include:

  • HARLEY-DAVIDSON INC has improved earnings per share by 22.2% 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, HARLEY-DAVIDSON INC increased its bottom line by earning $3.27 versus $2.71 in the prior year. This year, the market expects an improvement in earnings ($3.94 versus $3.27).
  • HOG's revenue growth trails the industry average of 21.8%. Since the same quarter one year prior, revenues slightly increased by 9.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Net operating cash flow has significantly increased by 287.65% to $203.59 million when compared to the same quarter last year. In addition, HARLEY-DAVIDSON INC has also vastly surpassed the industry average cash flow growth rate of 41.62%.
  • 45.76% is the gross profit margin for HARLEY-DAVIDSON INC which we consider to be strong. Regardless of HOG's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, HOG's net profit margin of 15.40% significantly outperformed against the industry.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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