Water-Logged And Getting Wetter: Louisiana-Pacific (LPX)

Trade-Ideas LLC identified Louisiana-Pacific (LPX) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate
By TheStreet Wire ,

Trade-Ideas LLC identified

Louisiana-Pacific

(

LPX

) 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 Louisiana-Pacific as such a stock due to the following factors:

  • LPX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $36.1 million.
  • LPX has traded 901,613 shares today.
  • LPX traded in a range 206.7% of the normal price range with a price range of $1.26.
  • LPX traded below its daily resistance level (quality: 26 days, meaning that the stock is crossing a resistance level set by the last 26 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 LPX:

Louisiana-Pacific Corporation, together with its subsidiaries, primarily manufactures and sells building products for use in new home construction, repair and remodeling, outdoor structures, and light industrial and commercial construction. LPX has a PE ratio of 77. Currently there are 3 analysts that rate Louisiana-Pacific a buy, 2 analysts rate it a sell, and 2 rate it a hold.

The average volume for Louisiana-Pacific has been 2.1 million shares per day over the past 30 days. Louisiana-Pacific has a market cap of $2.5 billion and is part of the services sector and wholesale industry. The stock has a beta of 0.55 and a short float of 16.2% with 9.29 days to cover. Shares are up 9.1% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Louisiana-Pacific as a

hold

. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, good cash flow from operations 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 ratings report include:

  • The debt-to-equity ratio is somewhat low, currently at 0.72, 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 this, the company maintains a quick ratio of 3.95, which clearly demonstrates the ability to cover short-term cash needs.
  • Net operating cash flow has significantly increased by 173.02% to $41.50 million when compared to the same quarter last year. In addition, LOUISIANA-PACIFIC CORP has also vastly surpassed the industry average cash flow growth rate of -27.28%.
  • 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. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
  • 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. Compared to other companies in the Paper & Forest Products industry and the overall market, LOUISIANA-PACIFIC CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for LOUISIANA-PACIFIC CORP is currently extremely low, coming in at 10.06%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -3.95% trails that of the industry average.

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