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 or Stephanie Link.

Trade-Ideas LLC identified

Align Technology

(

ALGN

) 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 Align Technology as such a stock due to the following factors:

  • ALGN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $55.1 million.
  • ALGN has traded 1.3 million shares today.
  • ALGN is trading at 40.64 times the normal volume for the stock at this time of day.
  • ALGN 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 ALGN:

TheStreet Recommends

Align Technology, Inc. operates as a medical device company primarily in the United States and internationally. ALGN has a PE ratio of 32.4. Currently there are 7 analysts that rate Align Technology a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Align Technology has been 670,900 shares per day over the past 30 days. Align Technology has a market cap of $4.7 billion and is part of the health care sector and health services industry. The stock has a beta of 1.26 and a short float of 7.1% with 4.44 days to cover. Shares are up 4.9% year-to-date as of the close of trading on Thursday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Align Technology 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, notable return on equity, expanding profit margins and good cash flow from operations. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 4.6%. Since the same quarter one year prior, revenues rose by 15.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • ALGN has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 2.80, which clearly demonstrates the ability to cover short-term cash needs.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Health Care Equipment & Supplies industry and the overall market, ALIGN TECHNOLOGY INC's return on equity exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for ALIGN TECHNOLOGY INC is currently very high, coming in at 78.57%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 20.14% is above that of the industry average.
  • Net operating cash flow has increased to $67.57 million or 22.54% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -18.13%.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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