Trade-Ideas: JC Penney (JCP) Is Today's "Roof Leaker" Stock
Trade-Ideas LLC identified JC Penney ( JCP) 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 JC Penney as such a stock due to the following factors:
- JCP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $101.9 million.
- JCP has traded 3.0 million shares today.
- JCP is trading at 4.40 times the normal volume for the stock at this time of day.
- JCP 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 JCP: J. C. Penney Company, Inc., through its subsidiary, J. C. Penney Corporation, Inc., sells merchandise through department stores in the United States. Currently there are 7 analysts that rate JC Penney a buy, 2 analysts rate it a sell, and 8 rate it a hold. The average volume for JC Penney has been 14.5 million shares per day over the past 30 days. JC Penney has a market cap of $2.9 billion and is part of the services sector and retail industry. The stock has a beta of 0.51 and a short float of 28.3% with 6.91 days to cover. Shares are up 35.6% year-to-date as of the close of trading on Wednesday.
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Analysis:
rates JC Penney as a
. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and poor profit margins. Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 4.7%. Since the same quarter one year prior, revenues slightly increased by 2.6%. 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.
- Net operating cash flow has increased to $856.00 million or 23.52% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -6.56%.
- 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. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- 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 Multiline Retail industry. The net income has significantly decreased by 122.0% when compared to the same quarter one year ago, falling from -$59.00 million to -$131.00 million.
- The debt-to-equity ratio is very high at 3.67 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.37, which clearly demonstrates the inability to cover short-term cash needs.
- You can view the full JC Penney Ratings Report.
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