Trade-Ideas LLC identified

Adobe Systems

(

ADBE

) 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 Adobe Systems as such a stock due to the following factors:

  • ADBE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $319.3 million.
  • ADBE has traded 587,450 shares today.
  • ADBE is trading at 1.52 times the normal volume for the stock at this time of day.
  • ADBE 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.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in ADBE with the Ticky from Trade-Ideas. See the FREE profile for ADBE NOW at Trade-Ideas

More details on ADBE:

TST Recommends

Adobe Systems Incorporated is a diversified software company worldwide. It operates in three segments: Digital Media, Digital Marketing, and Print and Publishing. ADBE has a PE ratio of 7. Currently there are 9 analysts that rate Adobe Systems a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Adobe Systems has been 2.6 million shares per day over the past 30 days. Adobe Systems has a market cap of $43.3 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 1.09 and a short float of 1% with 1.28 days to cover. Shares are down 7.5% year-to-date as of the close of trading on Wednesday.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Adobe Systems as a

buy

. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, compelling growth in net income and good cash flow from operations. We feel its strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 16.5%. Since the same quarter one year prior, revenues rose by 21.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Although ADBE's debt-to-equity ratio of 0.27 is very low, it is currently higher than that of the industry average. To add to this, ADBE has a quick ratio of 2.11, which demonstrates the ability of the company to cover short-term liquidity needs.
  • ADOBE SYSTEMS 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. We feel that this trend should continue. During the past fiscal year, ADOBE SYSTEMS INC increased its bottom line by earning $1.24 versus $0.52 in the prior year. This year, the market expects an improvement in earnings ($2.73 versus $1.24).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Software industry. The net income increased by 152.7% when compared to the same quarter one year prior, rising from $88.14 million to $222.71 million.
  • Net operating cash flow has increased to $454.52 million or 13.69% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -7.30%.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.