NEW YORK (TheStreet) -- Raytheon (RTN) - Get Report broke out to the upside from an 11-month consolidation earlier this month. RTN looks great, but it is extended so we would rather look for a pullback to buy.
In the chart of RTN, above, we can see the upside breakout this month as RTN broke out over the March and August highs. The 50-day simple moving average has had a positive slope since August and the On-Balance-Volume (OBV) line has been erratic for much of the past two months.
In this longer-term chart of RTN, we see how successful the 40-week moving average would have been with giving buy signals for RTN. Also, the OBV has been moving steadily higher on this time frame. So with RTN, we have a great looking long term chart, but we have had a steep rally in the short run. Traders should look to buy a dip toward $115 or better, if available.
Separately, TheStreet Ratings team rates RAYTHEON CO as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
We rate RAYTHEON CO (RTN) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, solid stock price performance and notable return on equity. We feel its strengths outweigh the fact that the company has had sub par growth in net income.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- RTN's revenue growth has slightly outpaced the industry average of 1.5%. Since the same quarter one year prior, revenues slightly increased by 5.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The current debt-to-equity ratio, 0.53, is low and is below the industry average, implying that there has been successful management of debt levels.
- Net operating cash flow has significantly increased by 159.66% to $1,101.00 million when compared to the same quarter last year. In addition, RAYTHEON CO has also vastly surpassed the industry average cash flow growth rate of 35.51%.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. 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.
- 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 Aerospace & Defense industry and the overall market on the basis of return on equity, RAYTHEON CO has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- You can view the full analysis from the report here: RTN