Lions Gate Entertainment (LGF) Marked As Today's Roof Leaker Stock

Trade-Ideas LLC identified Lions Gate Entertainment (LGF) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate
By TheStreet Wire ,

Trade-Ideas LLC identified

Lions Gate Entertainment

(

LGF

) 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 Lions Gate Entertainment as such a stock due to the following factors:

  • LGF has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $89.5 million.
  • LGF has traded 1.1 million shares today.
  • LGF is trading at 2.64 times the normal volume for the stock at this time of day.
  • LGF 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 LGF:

Lions Gate Entertainment Corp. engages in motion picture production and distribution, television programming and syndication, home entertainment, family entertainment, digital distribution, channel platforms, and international distribution and sales activities. The stock currently has a dividend yield of 0.9%. LGF has a PE ratio of 48. Currently there are 11 analysts that rate Lions Gate Entertainment a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Lions Gate Entertainment has been 1.1 million shares per day over the past 30 days. Lions Gate Entertainment has a market cap of $5.6 billion and is part of the services sector and media industry. The stock has a beta of 0.82 and a short float of 11.1% with 4.41 days to cover. Shares are up 13.1% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Lions Gate Entertainment as a

buy

. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins, solid stock price performance and notable return on equity. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • Net operating cash flow has increased to -$137.73 million or 29.48% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 5.34%.
  • 38.58% is the gross profit margin for LIONS GATE ENTERTAINMENT CP which we consider to be strong. Regardless of LGF's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, LGF's net profit margin of -8.82% significantly underperformed when compared to the industry average.
  • LGF, with its decline in revenue, underperformed when compared the industry average of 7.0%. Since the same quarter one year prior, revenues fell by 13.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. In comparison to the other companies in the Media industry and the overall market, LIONS GATE ENTERTAINMENT CP's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.

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