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

IAC/InterActiveCorp

(

IACI

) 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 IAC/InterActiveCorp as such a stock due to the following factors:

  • IACI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $71.3 million.
  • IACI has traded 293,780 shares today.
  • IACI is trading at 1.93 times the normal volume for the stock at this time of day.
  • IACI 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 IACI:

IAC/InterActiveCorp operates as a media and Internet company in the United States and internationally. The company operates in five segments: Search & Applications, Match, Local, Media, and Other segments. The stock currently has a dividend yield of 1.4%. IACI has a PE ratio of 21.8. Currently there are 7 analysts that rate IAC/InterActiveCorp a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for IAC/InterActiveCorp has been 1.1 million shares per day over the past 30 days. IAC/InterActiveCorp has a market cap of $5.2 billion and is part of the technology sector and internet industry. The stock has a beta of 0.57 and a short float of 4.2% with 2.42 days to cover. Shares are down 3.1% year-to-date as of the close of trading on Friday.

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 IAC/InterActiveCorp as a

buy

. The company's strengths can be seen in multiple areas, such as its notable return on equity, reasonable valuation levels, expanding profit margins, solid stock price performance 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:

  • 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 Internet Software & Services industry and the overall market, IAC/INTERACTIVECORP's return on equity exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for IAC/INTERACTIVECORP is currently very high, coming in at 71.74%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, IACI's net profit margin of 4.84% significantly trails the industry average.
  • Compared to its closing price of one year ago, IACI's share price has jumped by 29.83%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • IAC/INTERACTIVECORP's earnings per share declined by 32.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, IAC/INTERACTIVECORP increased its bottom line by earning $3.27 versus $1.81 in the prior year. This year, the market expects an improvement in earnings ($3.63 versus $3.27).

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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