Today's Roof Leaker Stock Is Caterpillar (CAT)
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 Caterpillar as such a stock due to the following factors:
- CAT has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $434.7 million.
- CAT has traded 3.4 million shares today.
- CAT is trading at 1.77 times the normal volume for the stock at this time of day.
- CAT 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 CAT:
Caterpillar Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. The stock currently has a dividend yield of 4.2%. CAT has a PE ratio of 17. Currently there is 1 analyst that rates Caterpillar a buy, 1 analyst rates it a sell, and 11 rate it a hold.
The average volume for Caterpillar has been 6.0 million shares per day over the past 30 days. Caterpillar has a market cap of $42.5 billion and is part of the industrial goods sector and industrial industry. The stock has a beta of 1.24 and a short float of 7.2% with 6.86 days to cover. Shares are up 8% year-to-date as of the close of trading on Friday.
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Analysis:
rates Caterpillar as a
. Among the primary strengths of the company is its expanding profit margins over time. At the same time, however, we also find weaknesses including a generally disappointing performance in the stock itself, feeble growth in the company's earnings per share and deteriorating net income.
Highlights from the ratings report include:
- 36.11% is the gross profit margin for CATERPILLAR INC which we consider to be strong. Regardless of CAT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 2.86% trails the industry average.
- CAT, with its decline in revenue, underperformed when compared the industry average of 14.0%. Since the same quarter one year prior, revenues fell by 25.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The debt-to-equity ratio is very high at 2.45 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, CAT maintains a poor quick ratio of 0.85, which illustrates the inability to avoid short-term cash problems.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Machinery industry. The net income has significantly decreased by 78.2% when compared to the same quarter one year ago, falling from $1,245.00 million to $271.00 million.
- Net operating cash flow has significantly decreased to $489.00 million or 61.49% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full Caterpillar Ratings Report.
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