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.

Trade-Ideas LLC identified

L-3 Communications Holdings

(

LLL

) 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 L-3 Communications Holdings as such a stock due to the following factors:

  • LLL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $61.7 million.
  • LLL has traded 324,885 shares today.
  • LLL traded in a range 223.4% of the normal price range with a price range of $3.24.
  • LLL traded below its daily resistance level (quality: 23 days, meaning that the stock is crossing a resistance level set by the last 23 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.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in LLL with the Ticky from Trade-Ideas. See the FREE profile for LLL NOW at Trade-Ideas

More details on LLL:

L-3 Communications Holdings, Inc., through its subsidiary, L-3 Communications Corporation, provides intelligence, surveillance, and reconnaissance (ISR) systems; aircraft sustainment; and simulation and training products and services in the United States and internationally. The stock currently has a dividend yield of 2.1%. LLL has a PE ratio of 18. Currently there are 4 analysts that rate L-3 Communications Holdings a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for L-3 Communications Holdings has been 554,000 shares per day over the past 30 days. L-3 has a market cap of $10.0 billion and is part of the industrial goods sector and aerospace/defense industry. The stock has a beta of 0.82 and a short float of 2.3% with 3.50 days to cover. Shares are down 1.7% year-to-date as of the close of trading on Wednesday.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates L-3 Communications Holdings as a

buy

. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and good cash flow from operations. We feel its strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.

Highlights from the ratings report include:

  • The debt-to-equity ratio is somewhat low, currently at 0.75, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.05, which illustrates the ability to avoid short-term cash problems.
  • Net operating cash flow has significantly increased by 240.32% to $87.00 million when compared to the same quarter last year. In addition, L-3 COMMUNICATIONS HLDGS INC has also vastly surpassed the industry average cash flow growth rate of 30.90%.
  • LLL, with its decline in revenue, underperformed when compared the industry average of 4.2%. Since the same quarter one year prior, revenues slightly dropped by 8.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • In its most recent trading session, LLL has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.