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Trade-Ideas: Computer (CSC) Is Today's "Water-Logged And Getting Wetter" 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 Computer ( CSC) 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 Computer as such a stock due to the following factors:

  • CSC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $50.5 million.
  • CSC has traded 80,680 shares today.
  • CSC traded in a range 213.9% of the normal price range with a price range of $2.07.
  • CSC traded below its daily resistance level (quality: 183 days, meaning that the stock is crossing a resistance level set by the last 183 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 CSC:

Computer Sciences Corporation provides information technology (IT) and professional services and solutions in North America, Europe, Asia, and Australia. The company operates through Global Business Services, Global Infrastructure Services, and North American Public Sector segments. The stock currently has a dividend yield of 1.5%. CSC has a PE ratio of 15.6. Currently there are 2 analysts that rate Computer a buy, 1 analyst rates it a sell, and 8 rate it a hold.

The average volume for Computer has been 902,000 shares per day over the past 30 days. Computer has a market cap of $9.1 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 1.27 and a short float of 3.7% with 5.61 days to cover. Shares are up 11.1% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Computer as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, good cash flow from operations and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • Compared to its closing price of one year ago, CSC's share price has jumped by 30.90%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, CSC should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The debt-to-equity ratio is somewhat low, currently at 0.74, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, CSC has a quick ratio of 1.50, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has significantly increased by 1236.58% to $548.00 million when compared to the same quarter last year. In addition, COMPUTER SCIENCES CORP has also vastly surpassed the industry average cash flow growth rate of -3.17%.
  • 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 IT Services industry and the overall market on the basis of return on equity, COMPUTER SCIENCES CORP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.

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