One is a great buy and a fast mover. The other? Not so much.
AutoZone has a nice base dating back to February, as you'll see in the chart below
In other words, these stocks are being bought by big money -- big institutional investors -- and I like to piggyback on their buying. I have $540 as an initial buy point and $545 as the add level. I do like to see an increase in volume as the price passes my buy points. The most likely next stop would be $600, where round-number resistance sits. TRW is also in the automotive sector and had a huge move Thursday. TRW does not move fast like the leading stocks I like to trade, contrary to Thursday's action. Thursday's move came as a result of speculation about a buyout offer, which news reports later confirmed. We may see a bidding war, or maybe the offer will even be withdrawn, but the move is over for me. Although TRW has been trending higher, I prefer AutoZone at the moment, and I'd even consider fading this large spike move in TRW. Thank you for reading. Warren Bevan at www.wizzentrading.com At the time of publication, Bevan had no positions in stocks mentioned. This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
Now let's look at TheStreet Ratings' take on TRW: TheStreet Ratings team rates TRW AUTOMOTIVE HOLDINGS CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate TRW AUTOMOTIVE HOLDINGS CORP (TRW) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, increase in net income, attractive valuation levels and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- TRW's revenue growth has slightly outpaced the industry average of 3.4%. Since the same quarter one year prior, revenues slightly increased by 5.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 30.23% and other important driving factors, this stock has surged by 35.17% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, TRW should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- The net income growth from the same quarter one year ago has significantly exceeded that of the Auto Components industry average, but is less than that of the S&P 500. The net income increased by 22.8% when compared to the same quarter one year prior, going from $162.00 million to $199.00 million.
- The current debt-to-equity ratio, 0.47, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.81 is somewhat weak and could be cause for future problems.
- You can view the full analysis from the report here: TRW Ratings Report