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

Chico's FAS

(

CHS

) 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 Chico's FAS as such a stock due to the following factors:

  • CHS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $35.0 million.
  • CHS has traded 2.5 million shares today.
  • CHS traded in a range 206.2% of the normal price range with a price range of $0.95.
  • CHS traded below its daily resistance level (quality: 6 days, meaning that the stock is crossing a resistance level set by the last 6 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 CHS:

Chico's FAS, Inc., together with its subsidiaries, operates as a specialty retailer of private branded, casual-to-dressy clothing, intimates, complementary accessories, and other non-clothing items in the United States. The stock currently has a dividend yield of 1.9%. CHS has a PE ratio of 37.7. Currently there are 7 analysts that rate Chico's FAS a buy, no analysts rate it a sell, and 9 rate it a hold.

The average volume for Chico's FAS has been 2.7 million shares per day over the past 30 days. Chico's FAS has a market cap of $2.4 billion and is part of the services sector and retail industry. Shares are down 17.9% year-to-date as of the close of trading on Tuesday.

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 Chico's FAS as a

buy

. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:

  • CHS 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. Despite the fact that CHS's debt-to-equity ratio is low, the quick ratio, which is currently 0.60, displays a potential problem in covering short-term cash needs.
  • The gross profit margin for CHICOS FAS INC is rather high; currently it is at 55.69%. Regardless of CHS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -0.05% trails the industry average.
  • CHICOS FAS INC 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. 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, CHICOS FAS INC reported lower earnings of $0.40 versus $1.08 in the prior year. This year, the market expects an improvement in earnings ($0.90 versus $0.40).
  • CHS, with its decline in revenue, slightly underperformed the industry average of 3.4%. Since the same quarter one year prior, revenues slightly dropped by 6.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The share price of CHICOS FAS INC has not done very well: it is down 19.99% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Despite the stock's decline during the last year, it is still somewhat more expensive (in proportion to its earnings over the last year) than most other stocks in its industry. We feel, however, that other strengths this company displays offset this slight negative.

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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