Eyes On Rock-Tenn Company (RKT): Highlighted Storm The Castle Stock - TheStreet

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

Rock-Tenn Company

(

RKT

) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Rock-Tenn Company as such a stock due to the following factors:

  • RKT has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $53.2 million.
  • RKT has traded 766,280 shares today.
  • RKT is trading at 2.54 times the normal volume for the stock at this time of day.
  • RKT crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on RKT:

Rock-Tenn Company manufactures and sells corrugated and consumer packaging products in the United States, Canada, Mexico, Chile, Argentina, Puerto Rico, and China. The company operates in three segments: Corrugated Packaging, Consumer Packaging, and Recycling. The stock currently has a dividend yield of 1.5%. RKT has a PE ratio of 14.7. Currently there are 7 analysts that rate Rock-Tenn Company a buy, 1 analyst rates it a sell, and 2 rate it a hold.

The average volume for Rock-Tenn Company has been 1.1 million shares per day over the past 30 days. Rock-Tenn has a market cap of $7.2 billion and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 1.91 and a short float of 2.7% with 3.13 days to cover. Shares are down 5.9% year-to-date as of the close of trading on Wednesday.

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 Rock-Tenn Company as a

buy

. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 10.7%. Since the same quarter one year prior, revenues slightly increased by 3.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.66, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.89 is somewhat weak and could be cause for future problems.
  • ROCK-TENN CO' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ROCK-TENN CO increased its bottom line by earning $4.97 versus $1.73 in the prior year. For the next year, the market is expecting a contraction of 29.4% in earnings ($3.51 versus $4.97).
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, RKT has underperformed the S&P 500 Index, declining 6.64% from its price level of one year ago. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.

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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