Trade-Ideas LLC identified

Colfax

(

CFX

) 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 Colfax as such a stock due to the following factors:

  • CFX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $37.5 million.
  • CFX has traded 1.0 million shares today.
  • CFX traded in a range 217% of the normal price range with a price range of $1.84.
  • CFX traded below its daily resistance level (quality: 8 days, meaning that the stock is crossing a resistance level set by the last 8 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 CFX:

Colfax Corporation, an industrial manufacturing and engineering company, provides gas-and fluid-handling, and fabrication technology products and services to commercial and governmental customers worldwide. CFX has a PE ratio of 18. Currently there are 3 analysts that rate Colfax a buy, 1 analyst rates it a sell, and 9 rate it a hold.

The average volume for Colfax has been 1.9 million shares per day over the past 30 days. Colfax has a market cap of $3.6 billion and is part of the industrial goods sector and industrial industry. The stock has a beta of 1.24 and a short float of 9% with 6.62 days to cover. Shares are down 43.2% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Colfax 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 and reasonable valuation levels. 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 current debt-to-equity ratio, 0.50, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.01, which illustrates the ability to avoid short-term cash problems.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 19.8%. Since the same quarter one year prior, revenues fell by 16.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Net operating cash flow has decreased to $85.27 million or 47.38% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Machinery industry and the overall market, COLFAX CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.

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