Trade-Ideas LLC identified

Advance Auto Parts

(

AAP

) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Advance Auto Parts as such a stock due to the following factors:

  • AAP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $184.2 million.
  • AAP has traded 355,214 shares today.
  • AAP is trading at 2.02 times the normal volume for the stock at this time of day.
  • AAP crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on AAP:

Advance Auto Parts, Inc., through its subsidiaries, engages in the automotive replacement parts, accessories, batteries, and maintenance items for domestic and imported cars, vans, sport utility vehicles, and light and heavy duty trucks. The stock currently has a dividend yield of 0.2%. AAP has a PE ratio of 24. Currently there are 9 analysts that rate Advance Auto Parts a buy, 1 analyst rates it a sell, and 9 rate it a hold.

The average volume for Advance Auto Parts has been 1.1 million shares per day over the past 30 days. Advance Auto Parts has a market cap of $11.3 billion and is part of the services sector and retail industry. The stock has a beta of 0.85 and a short float of 7.2% with 4.04 days to cover. Shares are up 4.3% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Advance Auto Parts as a

buy

. The company's strengths can be seen in multiple areas, such as its increase in net income, largely solid financial position with reasonable debt levels by most measures, growth in earnings per share and expanding profit margins. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:

  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Specialty Retail industry average. The net income increased by 7.2% when compared to the same quarter one year prior, going from $148.11 million to $158.81 million.
  • ADVANCE AUTO PARTS INC has improved earnings per share by 7.0% 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, ADVANCE AUTO PARTS INC reported lower earnings of $6.40 versus $6.71 in the prior year. This year, the market expects an improvement in earnings ($7.82 versus $6.40).
  • The current debt-to-equity ratio, 0.47, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.19 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • 47.96% is the gross profit margin for ADVANCE AUTO PARTS INC which we consider to be strong. Regardless of AAP'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 5.32% trails the industry average.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 6.8%. Since the same quarter one year prior, revenues slightly dropped by 1.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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