Trade-Ideas: Frontier Communications (FTR) Is Today's "Water-Logged And Getting Wetter" Stock
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 Frontier Communications as such a stock due to the following factors:
- FTR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $56.0 million.
- FTR has traded 6.2 million shares today.
- FTR traded in a range 218.2% of the normal price range with a price range of $0.30.
- FTR traded below its daily resistance level (quality: 56 days, meaning that the stock is crossing a resistance level set by the last 56 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 FTR:
Frontier Communications Corporation, a communications company, provides regulated and unregulated voice, data, and video services to residential, business, and wholesale customers in the United States. The stock currently has a dividend yield of 5.7%. FTR has a PE ratio of 56.3. Currently there are 3 analysts that rate Frontier Communications a buy, 2 analysts rate it a sell, and 6 rate it a hold.
The average volume for Frontier Communications has been 11.8 million shares per day over the past 30 days. Frontier has a market cap of $7.3 billion and is part of the technology sector and telecommunications industry. The stock has a beta of 0.98 and a short float of 12.3% with 15.49 days to cover. Shares are up 9.8% year-to-date as of the close of trading on Monday.
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Analysis:
rates Frontier Communications as a
. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.
Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 4.0%. Since the same quarter one year prior, revenues rose by 12.7%. 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 its closing price of one year ago, FTR's share price has jumped by 34.31%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- FRONTIER COMMUNICATIONS CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Stable earnings per share over the past two years indicate the company has sound management over its earnings and share float. We anticipate the company beginning to experience more growth in the coming year. During the past fiscal year, FRONTIER COMMUNICATIONS CORP increased its bottom line by earning $0.13 versus $0.12 in the prior year. This year, the market expects an improvement in earnings ($0.19 versus $0.13).
- 42.49% is the gross profit margin for FRONTIER COMMUNICATIONS CORP which we consider to be strong. Regardless of FTR's high profit margin, it has managed to decrease from the same period last year.
- 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 Diversified Telecommunication Services industry and the overall market, FRONTIER COMMUNICATIONS CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Frontier Communications Ratings Report.
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