GNC Holdings (GNC) Showing Signs Of Being Water-Logged And Getting Wetter

Trade-Ideas LLC identified GNC Holdings (GNC) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate
By TheStreet Wire ,

Trade-Ideas LLC identified

GNC Holdings

(

GNC

) 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 GNC Holdings as such a stock due to the following factors:

  • GNC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $49.1 million.
  • GNC has traded 2.4 million shares today.
  • GNC traded in a range 261.4% of the normal price range with a price range of $5.44.
  • GNC traded below its daily resistance level (quality: 528 days, meaning that the stock is crossing a resistance level set by the last 528 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 GNC:

GNC Holdings, Inc. operates as a specialty retailer of health and wellness products. The company operates through three segments: Retail, Franchise, and Manufacturing/Wholesale. The stock currently has a dividend yield of 2.4%. GNC has a PE ratio of 12. Currently there are 3 analysts that rate GNC Holdings a buy, no analysts rate it a sell, and 7 rate it a hold.

The average volume for GNC Holdings has been 2.0 million shares per day over the past 30 days. GNC has a market cap of $2.5 billion and is part of the services sector and retail industry. The stock has a beta of 0.61 and a short float of 3.3% with 1.40 days to cover. Shares are down 33.9% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates GNC Holdings as a

hold

. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.6%. Since the same quarter one year prior, revenues slightly increased by 2.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • 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. When compared to other companies in the Specialty Retail industry and the overall market, GNC HOLDINGS INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • GNC HOLDINGS INC's earnings per share declined by 23.9% 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, GNC HOLDINGS INC increased its bottom line by earning $2.81 versus $2.72 in the prior year. This year, the market expects an improvement in earnings ($2.89 versus $2.81).
  • The debt-to-equity ratio is very high at 2.21 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, GNC's quick ratio is somewhat strong at 1.16, demonstrating the ability to handle short-term liquidity needs.
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Specialty Retail industry average. The net income has significantly decreased by 28.9% when compared to the same quarter one year ago, falling from $64.31 million to $45.75 million.

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