Trade-Ideas LLC identified

KAR Auction Services

(

KAR

) 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 KAR Auction Services as such a stock due to the following factors:

  • KAR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $39.2 million.
  • KAR has traded 2.2 million shares today.
  • KAR traded in a range 225.9% of the normal price range with a price range of $1.12.
  • KAR traded below its daily resistance level (quality: 97 days, meaning that the stock is crossing a resistance level set by the last 97 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 KAR:

KAR Auction Services, Inc., together with its subsidiaries, provides vehicle auction services in North America. It operates in three segments: ADESA Auctions, IAA, and AFC. The stock currently has a dividend yield of 2.9%. KAR has a PE ratio of 24. Currently there are 7 analysts that rate KAR Auction Services a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for KAR Auction Services has been 1.5 million shares per day over the past 30 days. KAR Auction Services has a market cap of $5.1 billion and is part of the services sector and specialty retail industry. The stock has a beta of 1.07 and a short float of 1.1% with 1.41 days to cover. Shares are down 0.8% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates KAR Auction Services as a

buy

. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, growth in earnings per share, good cash flow from operations and notable return on equity. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 5.6%. Since the same quarter one year prior, revenues rose by 13.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. 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.
  • KAR AUCTION SERVICES INC has improved earnings per share by 12.1% 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, KAR AUCTION SERVICES INC increased its bottom line by earning $1.19 versus $0.48 in the prior year. This year, the market expects an improvement in earnings ($1.72 versus $1.19).
  • Net operating cash flow has increased to $114.90 million or 19.31% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -8.30%.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Commercial Services & Supplies industry and the overall market on the basis of return on equity, KAR AUCTION SERVICES INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.

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