Trade-Ideas LLC identified

Edison International

(

EIX

) 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 Edison International as such a stock due to the following factors:

  • EIX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $119.4 million.
  • EIX has traded 2.2 million shares today.
  • EIX is trading at 7.16 times the normal volume for the stock at this time of day.
  • EIX 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 EIX:

TheStreet Recommends

Edison International, through its subsidiaries, generates and supplies electricity. The company generates electricity through hydroelectric, diesel, natural gas, nuclear, and photovoltaic sources. The stock currently has a dividend yield of 2.6%. EIX has a PE ratio of 14. Currently there are 9 analysts that rate Edison International a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Edison International has been 2.4 million shares per day over the past 30 days. Edison International has a market cap of $21.2 billion and is part of the utilities sector and utilities industry. The stock has a beta of 0.49 and a short float of 2.8% with 4.62 days to cover. Shares are down 1.7% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Edison International as a

buy

. The company's strengths can be seen in multiple areas, such as its solid stock price performance, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures, notable return on equity and growth in earnings per share. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • Net operating cash flow has significantly increased by 665.71% to $804.00 million when compared to the same quarter last year. In addition, EDISON INTERNATIONAL has also vastly surpassed the industry average cash flow growth rate of 24.11%.
  • The debt-to-equity ratio is somewhat low, currently at 0.97, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.19 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Electric Utilities industry and the overall market on the basis of return on equity, EDISON INTERNATIONAL has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • EDISON INTERNATIONAL has improved earnings per share by 7.5% 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 year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, EDISON INTERNATIONAL increased its bottom line by earning $4.34 versus $2.67 in the prior year. For the next year, the market is expecting a contraction of 13.6% in earnings ($3.75 versus $4.34).

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