Masonite (DOOR) Stock Headed Through the Right Door, Patience Required
NEW YORK (TheStreet) -- Masonite International (DOOR) - Get Report is a chart turnaround in progress, so some patience is needed. The company is an exterior door manufacturer for residential construction and remodeling.
The popular moving averages are mixed. We can see a death cross in early October between the 50-day and 200-day moving averages -- the 50-day going below the 200-day. Right now prices have rallied back above the 50-day. The On-Balance-Volume (OBV) is neutral, but with prices in a short-term downtrend, we take that as a positive, in that selling is light.
If selling was heavier, the slope of the OBV line would be down. We can also see a bullish divergence between the price action and the momentum study in October/November. The bullish divergences in the current (fourth quarter) market leaders showed up in August and September.
This weekly chart of DOOR, above, shows a flat 40-week moving average and slightly lower OBV line. In the bottom panel, you can see that the Moving Average Convergence Divergence oscillator is narrowing towards a bullish crossover. Aggressive traders could buy DOOR here, but waiting for this turnaround to develop more is not a bad approach either.
TheStreet Ratings team rates MASONITE INTERNATIONAL CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate MASONITE INTERNATIONAL CORP (DOOR) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio is somewhat low, currently at 0.74, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.28, which illustrates the ability to avoid short-term cash problems.
- 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. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- DOOR, with its decline in revenue, slightly underperformed the industry average of 6.1%. Since the same quarter one year prior, revenues slightly dropped by 0.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Building Products industry. The net income has significantly decreased by 63.4% when compared to the same quarter one year ago, falling from -$9.97 million to -$16.28 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Building Products industry and the overall market, MASONITE INTERNATIONAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: DOOR
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.