Kansas City Southern (KSU) Shows Signs Of Being Water-Logged And Getting Wetter
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.
Trade-Ideas LLC identified
(
) 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 Kansas City Southern as such a stock due to the following factors:
- KSU has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $73.1 million.
- KSU has traded 588,780 shares today.
- KSU traded in a range 212.8% of the normal price range with a price range of $3.79.
- KSU traded below its daily resistance level (quality: 58 days, meaning that the stock is crossing a resistance level set by the last 58 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 KSU:
Kansas City Southern, through its subsidiaries, engages in the freight rail transportation business. The stock currently has a dividend yield of 1.1%. KSU has a PE ratio of 25.2. Currently there are 4 analysts that rate Kansas City Southern a buy, 1 analyst rates it a sell, and 7 rate it a hold.
The average volume for Kansas City Southern has been 897,400 shares per day over the past 30 days. Kansas City Southern has a market cap of $12.7 billion and is part of the services sector and transportation industry. The stock has a beta of 1.22 and a short float of 3.1% with 4.35 days to cover. Shares are down 5.2% year-to-date as of the close of trading on Friday.
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Analysis:
rates Kansas City Southern as a
. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, revenue growth, expanding profit margins, solid stock price performance and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows weak operating cash flow.
Highlights from the ratings report include:
- KANSAS CITY SOUTHERN has improved earnings per share by 24.3% 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, KANSAS CITY SOUTHERN increased its bottom line by earning $4.56 versus $3.18 in the prior year. This year, the market expects an improvement in earnings ($5.38 versus $4.56).
- Despite its growing revenue, the company underperformed as compared with the industry average of 14.0%. Since the same quarter one year prior, revenues slightly increased by 4.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 43.77% is the gross profit margin for KANSAS CITY SOUTHERN which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 21.94% trails the industry average.
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. 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.
- The debt-to-equity ratio is somewhat low, currently at 0.62, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that KSU's debt-to-equity ratio is low, the quick ratio, which is currently 0.59, displays a potential problem in covering short-term cash needs.
- You can view the full Kansas City Southern Ratings Report.
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