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

SunEdison

(

SUNE

) 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 SunEdison as such a stock due to the following factors:

  • SUNE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $355.7 million.
  • SUNE has traded 10.3 million shares today.
  • SUNE is trading at 2.68 times the normal volume for the stock at this time of day.
  • SUNE 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 SUNE:

SunEdison, Inc. develops, manufactures, and sells silicon wafers to the semiconductor industry. The company operates through three segments: Solar Energy, TerraForm Power, and Semiconductor Materials. Currently there are 6 analysts that rate SunEdison a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for SunEdison has been 10.6 million shares per day over the past 30 days. SunEdison has a market cap of $7.0 billion and is part of the technology sector and electronics industry. The stock has a beta of 3.77 and a short float of 26.2% with 4.66 days to cover. Shares are up 31.4% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates SunEdison as a

sell

. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk and weak operating cash flow.

Highlights from the ratings report include:

  • The debt-to-equity ratio is very high at 77.64 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.37, which clearly demonstrates the inability to cover short-term cash needs.
  • Net operating cash flow has decreased to -$308.00 million or 43.12% when compared to the same quarter last year. Despite a decrease in cash flow SUNEDISON INC is still fairing well by exceeding its industry average cash flow growth rate of -84.46%.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 12.6%. Since the same quarter one year prior, revenues slightly dropped by 5.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • SUNEDISON INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SUNEDISON INC reported poor results of -$4.36 versus -$2.39 in the prior year. This year, the market expects an improvement in earnings (-$2.84 versus -$4.36).
  • Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, SUNEDISON INC's return on equity significantly trails that of both the industry average and the S&P 500.

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