Trade-Ideas LLC identified

Coca-Cola

(

CCE

) 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 Coca-Cola as such a stock due to the following factors:

  • CCE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $119.8 million.
  • CCE has traded 1.0 million shares today.
  • CCE is trading at 2.30 times the normal volume for the stock at this time of day.
  • CCE 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 CCE:

Coca-Cola Enterprises, Inc. produces, distributes, and markets non-alcoholic beverages in Belgium, continental France, the Great Britain, Luxembourg, Monaco, the Netherlands, Norway, and Sweden. The stock currently has a dividend yield of 2.3%. CCE has a PE ratio of 21. Currently there are 3 analysts that rate Coca-Cola a buy, 1 analyst rates it a sell, and 8 rate it a hold.

The average volume for Coca-Cola has been 2.1 million shares per day over the past 30 days. Coca-Cola has a market cap of $11.8 billion and is part of the consumer goods sector and food & beverage industry. The stock has a beta of 1.05 and a short float of 2.5% with 2.39 days to cover. Shares are up 3.6% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Coca-Cola as a

buy

. The company's strengths can be seen in multiple areas, such as its expanding profit margins, solid stock price performance and notable return on equity. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • 41.27% is the gross profit margin for COCA-COLA ENTERPRISES INC which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, CCE's net profit margin of 4.35% significantly trails the industry average.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. 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.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 7.4%. Since the same quarter one year prior, revenues slightly dropped by 7.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • COCA-COLA ENTERPRISES INC's earnings per share declined by 27.5% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, COCA-COLA ENTERPRISES INC reported lower earnings of $2.54 versus $2.64 in the prior year. This year, the market expects an improvement in earnings ($2.65 versus $2.54).
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Beverages industry and the overall market, COCA-COLA ENTERPRISES INC's return on equity significantly exceeds that of both the industry average and the S&P 500.

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