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
) 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 GameStop as such a stock due to the following factors:
- GME has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $112.4 million.
- GME has traded 5.0 million shares today.
- GME is trading at 3.65 times the normal volume for the stock at this time of day.
- GME 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 GME:
GameStop Corp. operates as a multichannel video game, consumer electronics, and wireless services retailer. The stock currently has a dividend yield of 2.9%. GME has a PE ratio of 14.6. Currently there are 11 analysts that rate GameStop a buy, 2 analysts rate it a sell, and 3 rate it a hold.
The average volume for GameStop has been 2.5 million shares per day over the past 30 days. GameStop has a market cap of $5.2 billion and is part of the services sector and retail industry. The stock has a beta of 0.90 and a short float of 32.2% with 12.25 days to cover. Shares are down 6.5% year-to-date as of the close of trading on Monday.
rates GameStop as a
. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, compelling growth in net income, attractive valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins.
Highlights from the ratings report include:
- GME's revenue growth has slightly outpaced the industry average of 0.6%. Since the same quarter one year prior, revenues slightly increased by 7.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- GAMESTOP CORP has improved earnings per share by 28.3% 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 two years. We feel that this trend should continue. During the past fiscal year, GAMESTOP CORP turned its bottom line around by earning $3.02 versus -$2.23 in the prior year. This year, the market expects an improvement in earnings ($3.68 versus $3.02).
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Specialty Retail industry average. The net income increased by 24.5% when compared to the same quarter one year prior, going from $54.60 million to $68.00 million.
- Net operating cash flow has increased to -$277.20 million or 16.35% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -3.34%.
- You can view the full GameStop Ratings Report.