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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 or Stephanie Link.

Trade-Ideas LLC identified

A.O. Smith Corporation

(

AOS

) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified A.O. Smith Corporation as such a stock due to the following factors:

  • AOS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $39.5 million.
  • AOS has traded 357,858 shares today.
  • AOS traded in a range 321.7% of the normal price range with a price range of $3.08.
  • AOS traded below its daily resistance level (quality: 103 days, meaning that the stock is crossing a resistance level set by the last 103 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on AOS:

TheStreet Recommends

A. O. Smith Corporation engages in the manufacture and sale of water heaters and boilers to the residential and commercial markets primarily in the United States, Canada, Europe, India, and China. The company operates in two segments, North America and Rest of World. The stock currently has a dividend yield of 0.9%. AOS has a PE ratio of 28.5. Currently there are 2 analysts that rate A.O. Smith Corporation a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for A.O. Smith Corporation has been 813,000 shares per day over the past 30 days. A.O. Smith has a market cap of $4.1 billion and is part of the industrial goods sector and industrial industry. The stock has a beta of 1.22 and a short float of 1.9% with 1.64 days to cover. Shares are down 7% year-to-date as of the close of trading on Friday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates A.O. Smith Corporation as a

buy

. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, growth in earnings per share and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the ratings report include:

  • AOS's revenue growth has slightly outpaced the industry average of 8.2%. Since the same quarter one year prior, revenues rose by 16.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • AOS's debt-to-equity ratio is very low at 0.18 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, AOS has a quick ratio of 1.71, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Powered by its strong earnings growth of 26.58% and other important driving factors, this stock has surged by 54.76% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, AOS should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • SMITH (A O) CORP has improved earnings per share by 26.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, SMITH (A O) CORP increased its bottom line by earning $1.75 versus $1.20 in the prior year. This year, the market expects an improvement in earnings ($2.05 versus $1.75).
  • 39.31% is the gross profit margin for SMITH (A O) CORP which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 8.61% is above that of the industry average.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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