Today's Roof Leaker Stock Is American Electric Power (AEP)
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 "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 American Electric Power as such a stock due to the following factors:
- AEP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $132.2 million.
- AEP has traded 3.1 million shares today.
- AEP is trading at 1.76 times the normal volume for the stock at this time of day.
- AEP 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 AEP:
American Electric Power Company, Inc., a public utility holding company, engages in the generation, transmission, and distribution of electricity for sale to retail and wholesale customers. The stock currently has a dividend yield of 3.7%. AEP has a PE ratio of 17.4. Currently there are 6 analysts that rate American Electric Power a buy, no analysts rate it a sell, and 7 rate it a hold.
The average volume for American Electric Power has been 2.8 million shares per day over the past 30 days. American Electric has a market cap of $28.4 billion and is part of the utilities sector and utilities industry. The stock has a beta of 0.39 and a short float of 0.8% with 1.65 days to cover. Shares are down 5.7% year-to-date as of the close of trading on Tuesday.
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Analysis:
rates American Electric Power as a
. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, solid stock price performance and reasonable valuation levels. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 10.6%. Since the same quarter one year prior, revenues slightly increased by 6.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in 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. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- AMERICAN ELECTRIC POWER CO's earnings per share declined by 45.1% 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, AMERICAN ELECTRIC POWER CO increased its bottom line by earning $3.35 versus $3.04 in the prior year. This year, the market expects an improvement in earnings ($3.50 versus $3.35).
- 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 on the basis of return on equity, AMERICAN ELECTRIC POWER CO has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- You can view the full American Electric Power Ratings Report.
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