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Water-Logged And Getting Wetter Stock Of The Day: Hershey (HSY)

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 Hershey ( HSY) 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 Hershey as such a stock due to the following factors:

  • HSY has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $89.4 million.
  • HSY has traded 983,292 shares today.
  • HSY traded in a range 277% of the normal price range with a price range of $2.86.
  • HSY traded below its daily resistance level (quality: 281 days, meaning that the stock is crossing a resistance level set by the last 281 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.

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More details on HSY:

The Hershey Company, together with its subsidiaries, manufactures, markets, distributes, and sells chocolate and sugar confectionery products, pantry items, and gum and mint refreshment products. The stock currently has a dividend yield of 2%. HSY has a PE ratio of 25.9. Currently there are 4 analysts that rate Hershey a buy, 1 analyst rates it a sell, and 5 rate it a hold.

The average volume for Hershey has been 1.0 million shares per day over the past 30 days. Hershey has a market cap of $15.4 billion and is part of the consumer goods sector and food & beverage industry. The stock has a beta of 0.12 and a short float of 2.3% with 4.32 days to cover. Shares are down 2.6% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Hershey as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, growth in earnings per share, increase in net income and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 3.1%. Since the same quarter one year prior, revenues slightly increased by 2.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • 49.20% is the gross profit margin for HERSHEY CO which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 13.48% is above that of the industry average.
  • HERSHEY CO's earnings per share improvement from the most recent quarter was slightly positive. 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, HERSHEY CO increased its bottom line by earning $3.61 versus $2.89 in the prior year. This year, the market expects an improvement in earnings ($4.11 versus $3.61).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Food Products industry average. The net income increased by 4.4% when compared to the same quarter one year prior, going from $241.91 million to $252.50 million.
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. 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.

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