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

Linear Technology

(

LLTC

) 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 Linear Technology as such a stock due to the following factors:

  • LLTC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $113.3 million.
  • LLTC has traded 3.1 million shares today.
  • LLTC is trading at 1.61 times the normal volume for the stock at this time of day.
  • LLTC 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 LLTC:

TheStreet Recommends

Linear Technology Corporation, together with its subsidiaries, designs, manufactures, and markets a line of analog integrated circuits (ICs) worldwide. The stock currently has a dividend yield of 2.6%. LLTC has a PE ratio of 23.0. Currently there are 6 analysts that rate Linear Technology a buy, 2 analysts rate it a sell, and 7 rate it a hold.

The average volume for Linear Technology has been 2.1 million shares per day over the past 30 days. Linear Technology has a market cap of $10.9 billion and is part of the technology sector and electronics industry. The stock has a beta of 1.36 and a short float of 4.3% with 4.16 days to cover. Shares are up 0.3% year-to-date as of the close of trading on Thursday.

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 Linear Technology as a

buy

. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and compelling growth in net income. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:

  • LINEAR TECHNOLOGY CORP has improved earnings per share by 15.9% 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, LINEAR TECHNOLOGY CORP increased its bottom line by earning $1.90 versus $1.72 in the prior year. This year, the market expects an improvement in earnings ($2.12 versus $1.90).
  • Despite its growing revenue, the company underperformed as compared with the industry average of 10.6%. Since the same quarter one year prior, revenues slightly increased by 5.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • LLTC has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 7.19, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for LINEAR TECHNOLOGY CORP is currently very high, coming in at 79.25%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 35.05% significantly outperformed against the industry average.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Semiconductors & Semiconductor Equipment industry average. The net income increased by 18.0% when compared to the same quarter one year prior, going from $104.75 million to $123.60 million.

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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