Fortune Brands (FBHS) Stock Shows Textbook Signs of a Breakout
NEW YORK (TheStreet) -- The breakout in Fortune Brands Home & Security (FBHS) - Get Report should be bought. A straightforward recommendation, so let's look at the charts.
This is Exhibit A of what a breakout looks like. In the chart above, we can see the new high for the move up made yesterday. The moving averages, both the 50-day and the 200-day moving averages, are rising. The On-Balance-Volume (OBV) line is pointed up. Everything technical looks to be in gear on the upside. Traders could try to buy any quick dip toward $53 if available.
The above chart of FBHS is also bullish. Prices, see above, are above the rising 40-week moving average. The OBV line is neutral on this timeframe. The Moving Average Convergence Divergence (MACD) oscillator is bullish and rising. A point-and-figure chart (not shown) gives us an upside target as high as $75. We suggest a sell-stop below $50 for now.
TheStreet Ratings team rates FORTUNE BRANDS HOME & SECUR as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
We rate FORTUNE BRANDS HOME & SECUR (FBHS) 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, largely solid financial position with reasonable debt levels by most measures, expanding profit margins, good cash flow from operations and solid stock price performance. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 6.1%. Since the same quarter one year prior, revenues rose by 17.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The current debt-to-equity ratio, 0.56, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.17, which illustrates the ability to avoid short-term cash problems.
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- FORTUNE BRANDS HOME & SECUR has improved earnings per share by 17.3% 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, FORTUNE BRANDS HOME & SECUR increased its bottom line by earning $1.65 versus $1.21 in the prior year. This year, the market expects an improvement in earnings ($2.06 versus $1.65).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Building Products industry. The net income increased by 609.5% when compared to the same quarter one year prior, rising from -$21.10 million to $107.50 million.
- You can view the full analysis from the report here: FBHS
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.