ITC Holdings (ITC) Roof Leaking Today
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
(
) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified ITC Holdings as such a stock due to the following factors:
- ITC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $51.4 million.
- ITC has traded 1.1 million shares today.
- ITC is trading at 2.69 times the normal volume for the stock at this time of day.
- ITC crossed below its 200-day simple moving average.
'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.
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More details on ITC:
ITC Holdings Corp., together with its subsidiaries, is engaged in the transmission of electricity in the United States. The stock currently has a dividend yield of 1.7%. ITC has a PE ratio of 20.8. Currently there are 7 analysts that rate ITC Holdings a buy, no analysts rate it a sell, and 4 rate it a hold.
The average volume for ITC Holdings has been 1.1 million shares per day over the past 30 days. ITC has a market cap of $6.0 billion and is part of the utilities sector and utilities industry. The stock has a beta of 0.35 and a short float of 1.8% with 2.02 days to cover. Shares are down 4.2% year-to-date as of the close of trading on Friday.
Analysis:
rates ITC Holdings as a
. The company's strengths can be seen in multiple areas, such as its notable return on equity, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
Highlights from the ratings report include:
- 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 Electric Utilities industry and the overall market, ITC HOLDINGS CORP's return on equity exceeds that of both the industry average and the S&P 500.
- The gross profit margin for ITC HOLDINGS CORP is rather high; currently it is at 66.01%. Regardless of ITC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ITC's net profit margin of 20.22% significantly outperformed against the industry.
- ITC HOLDINGS CORP's earnings per share declined by 37.9% 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, ITC HOLDINGS CORP increased its bottom line by earning $1.54 versus $1.47 in the prior year. This year, the market expects an improvement in earnings ($2.10 versus $1.54).
- ITC, with its decline in revenue, underperformed when compared the industry average of 9.4%. Since the same quarter one year prior, revenues slightly dropped by 9.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. 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.
- You can view the full ITC Holdings Ratings Report.
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