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
) 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 Royal Gold as such a stock due to the following factors:
- RGLD has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $65.3 million.
- RGLD has traded 713,948 shares today.
- RGLD is trading at 2.00 times the normal volume for the stock at this time of day.
- RGLD 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 RGLD:
Royal Gold, Inc., together with its subsidiaries, acquires and manages precious metals royalties, metal streams, and similar interests. It focuses on acquiring royalty interests or to finance projects that are in production or in development stage in exchange for royalty interests. The stock currently has a dividend yield of 1.1%. RGLD has a PE ratio of 75.1. Currently there are 7 analysts that rate Royal Gold a buy, no analysts rate it a sell, and 2 rate it a hold.
The average volume for Royal Gold has been 900,400 shares per day over the past 30 days. Royal has a market cap of $5.0 billion and is part of the basic materials sector and metals & mining industry. The stock has a beta of 0.57 and a short float of 6.3% with 3.39 days to cover. Shares are up 18.4% year-to-date as of the close of trading on Wednesday.
rates Royal Gold as a
. 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 and increase in net income. However, as a counter to these strengths, we find that the stock itself is trading at a premium valuation.
Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 4.7%. Since the same quarter one year prior, revenues rose by 22.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- RGLD's debt-to-equity ratio is very low at 0.13 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 36.13, which clearly demonstrates the ability to cover short-term cash needs.
- Powered by its strong earnings growth of 26.08% and other important driving factors, this stock has surged by 34.93% over the past year, outperforming the rise in the S&P 500 Index during the same period. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- 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. When compared to other companies in the Metals & Mining industry and the overall market, ROYAL GOLD INC's return on equity has significantly outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- You can view the full Royal Gold Ratings Report.