Storm The Castle: Johnson Controls (JCI) - TheStreet

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

Johnson Controls

(

JCI

) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Johnson Controls as such a stock due to the following factors:

  • JCI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $199.7 million.
  • JCI has traded 1.2 million shares today.
  • JCI is trading at 2.53 times the normal volume for the stock at this time of day.
  • JCI crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on JCI:

Johnson Controls, Inc. operates as a diversified technology and industrial company worldwide. The stock currently has a dividend yield of 2%. JCI has a PE ratio of 23.6. Currently there are 8 analysts that rate Johnson Controls a buy, 1 analyst rates it a sell, and 9 rate it a hold.

The average volume for Johnson Controls has been 3.4 million shares per day over the past 30 days. Johnson Controls has a market cap of $29.6 billion and is part of the consumer goods sector and automotive industry. The stock has a beta of 1.71 and a short float of 1.1% with 1.82 days to cover. Shares are down 10.7% 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 Johnson Controls as a

buy

. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 11.2%. Since the same quarter one year prior, revenues slightly increased by 3.0%. 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 debt-to-equity ratio is somewhat low, currently at 0.63, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that JCI's debt-to-equity ratio is low, the quick ratio, which is currently 0.57, displays a potential problem in covering short-term cash needs.
  • JOHNSON CONTROLS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, JOHNSON CONTROLS INC reported lower earnings of $1.64 versus $1.79 in the prior year. This year, the market expects an improvement in earnings ($3.16 versus $1.64).
  • 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. In comparison to the other companies in the Auto Components industry and the overall market, JOHNSON CONTROLS INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.

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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