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

Nordstrom

(

JWN

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

  • JWN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $78.1 million.
  • JWN has traded 975,055 shares today.
  • JWN is trading at 1.59 times the normal volume for the stock at this time of day.
  • JWN 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 JWN:

Nordstrom, Inc., a fashion specialty retailer, offers apparel, shoes, cosmetics, and accessories for men, women, and children in the United States and Canada. It operates through two segments, Retail and Credit. The stock currently has a dividend yield of 1.9%. JWN has a PE ratio of 21. Currently there are 7 analysts that rate Nordstrom a buy, 2 analysts rate it a sell, and 12 rate it a hold.

The average volume for Nordstrom has been 1.2 million shares per day over the past 30 days. Nordstrom has a market cap of $14.7 billion and is part of the services sector and retail industry. The stock has a beta of 0.96 and a short float of 4.8% with 6.63 days to cover. Shares are down 2.6% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Nordstrom as a

buy

. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, solid stock price performance, largely solid financial position with reasonable debt levels by most measures 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:

  • JWN's revenue growth has slightly outpaced the industry average of 1.8%. Since the same quarter one year prior, revenues slightly increased by 9.7%. 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.
  • 42.08% is the gross profit margin for NORDSTROM INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 3.98% is above that of 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.
  • NORDSTROM INC's earnings per share declined by 8.3% in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. We anticipate these figures will begin to experience more growth in the coming year. During the past fiscal year, NORDSTROM INC's EPS of $3.72 remained unchanged from the prior years' EPS of $3.72. This year, the market expects an improvement in earnings ($3.75 versus $3.72).
  • Even though the current debt-to-equity ratio is 1.23, it is still below the industry average, suggesting that this level of debt is acceptable within the Multiline Retail industry. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.03 is sturdy.

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