Worthington Industries (WOR) Stock: Worthy of Consideration, Shares Could Climb 25%
NEW YORK (TheStreet) -- It looks like Worthington Industries (WOR) - Get Report is ready to break out of a 10 month sideways trading range.
In this first chart of WOR, above, we can see some interesting price action. We can see a bullish divergence between the price action making lower lows and the momentum study making higher lows in August and September. The On-Balance-Volume (OBV) line climbs sharply with the rally in WOR, showing us that volume is confirming the move up. We also see WOR rally back above the 50-day simple moving average, and the slope of the average line is now positive.
This longer-term chart of WOR, above, gives us more confidence to be a buyer. The support WOR was finding around $25 is former resistance in the rallies of 2011 and 2013. The former resistance has become support. The OBV line on this time frame is positive and supportive of higher prices. The 40-week moving average has turned up.
Strategy: Go long WOR on a $32.50 buy stop and use a sell-stop below $29. Look for a rally into the highs of last year, around $40.
TheStreet Ratings team rates WORTHINGTON INDUSTRIES as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
We rate WORTHINGTON INDUSTRIES (WOR) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Net operating cash flow has significantly increased by 152.91% to $137.80 million when compared to the same quarter last year. In addition, WORTHINGTON INDUSTRIES has also vastly surpassed the industry average cash flow growth rate of -54.04%.
- Despite the weak revenue results, WOR has significantly outperformed against the industry average of 46.1%. Since the same quarter one year prior, revenues fell by 12.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- WOR's debt-to-equity ratio of 0.81 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.91 is weak.
- WORTHINGTON INDUSTRIES's earnings per share declined by 23.8% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, WORTHINGTON INDUSTRIES reported lower earnings of $1.11 versus $2.12 in the prior year. This year, the market expects an improvement in earnings ($2.25 versus $1.11).
- The change in net income from the same quarter one year ago has significantly exceeded that of the Metals & Mining industry average, but is less than that of the S&P 500. The net income has significantly decreased by 28.9% when compared to the same quarter one year ago, falling from $44.17 million to $31.41 million.
- You can view the full analysis from the report here: WOR
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.