Trade-Ideas LLC identified

Texas Instruments

(

TXN

) 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 Texas Instruments as such a stock due to the following factors:

  • TXN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $241.0 million.
  • TXN has traded 5.4 million shares today.
  • TXN is trading at 1.81 times the normal volume for the stock at this time of day.
  • TXN 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 TXN:

Texas Instruments Incorporated designs, manufactures, and sells semiconductors to electronics designers and manufacturers worldwide. It operates through two segments, Analog and Embedded Processing. The stock currently has a dividend yield of 2.8%. TXN has a PE ratio of 2. Currently there are 10 analysts that rate Texas Instruments a buy, 1 analyst rates it a sell, and 16 rate it a hold.

The average volume for Texas Instruments has been 6.2 million shares per day over the past 30 days. Texas Instruments has a market cap of $55.1 billion and is part of the technology sector and electronics industry. The stock has a beta of 1.30 and a short float of 2.7% with 5.16 days to cover. Shares are down 1.9% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Texas Instruments as a

buy

. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, notable return on equity, good cash flow from operations, solid stock price performance and expanding profit margins. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:

  • The current debt-to-equity ratio, 0.41, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, TXN has a quick ratio of 1.69, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, TEXAS INSTRUMENTS INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • Net operating cash flow has slightly increased to $1,409.00 million or 1.87% when compared to the same quarter last year. In addition, TEXAS INSTRUMENTS INC has also modestly surpassed the industry average cash flow growth rate of -5.34%.
  • TEXAS INSTRUMENTS INC reported flat earnings per share in the most recent quarter. 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, TEXAS INSTRUMENTS INC increased its bottom line by earning $2.58 versus $1.92 in the prior year. This year, the market expects an improvement in earnings ($2.72 versus $2.58).
  • After a year of stock price fluctuations, the net result is that TXN's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. 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.

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