Today's Roof Leaker Stock Is Netflix (NFLX)
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 Netflix as such a stock due to the following factors:
- NFLX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $821.3 million.
- NFLX has traded 1.9 million shares today.
- NFLX is trading at 2.38 times the normal volume for the stock at this time of day.
- NFLX 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 NFLX:
Netflix, Inc., an Internet television network, engages in the Internet delivery of TV shows and movies directly on TVs, computers, and mobile devices in the United States and internationally. The company operates in three segments: Domestic Streaming, International Streaming, and Domestic DVD. NFLX has a PE ratio of 103.8. Currently there are 14 analysts that rate Netflix a buy, 2 analysts rate it a sell, and 12 rate it a hold.
The average volume for Netflix has been 2.1 million shares per day over the past 30 days. Netflix has a market cap of $27.1 billion and is part of the services sector and media industry. The stock has a beta of 1.55 and a short float of 8.8% with 2.56 days to cover. Shares are up 28.3% year-to-date as of the close of trading on Friday.
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Analysis:
rates Netflix as a
. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including premium valuation, weak operating cash flow and relatively poor performance when compared with the S&P 500 during the past year.
Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 1.8%. Since the same quarter one year prior, revenues rose by 26.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The gross profit margin for NETFLIX INC is currently very high, coming in at 83.20%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 5.61% is above that of the industry average.
- NETFLIX INC reported significant earnings per share improvement 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, NETFLIX INC increased its bottom line by earning $4.32 versus $1.85 in the prior year. For the next year, the market is expecting a contraction of 25.0% in earnings ($3.24 versus $4.32).
- Net operating cash flow has significantly decreased to -$38.46 million or 192.80% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full Netflix Ratings Report.
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