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

USG

(

USG

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

  • USG has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $50.2 million.
  • USG has traded 860,664 shares today.
  • USG is trading at 1.84 times the normal volume for the stock at this time of day.
  • USG 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 USG:

USG Corporation, through its subsidiaries, operates as a manufacturer and distributor of building materials worldwide. It operates in three segments: North American Gypsum, Worldwide Ceilings, and Building Products Distribution. USG has a PE ratio of 40.7. Currently there are 4 analysts that rate USG a buy, no analysts rate it a sell, and 8 rate it a hold.

The average volume for USG has been 2.0 million shares per day over the past 30 days. USG has a market cap of $4.2 billion and is part of the industrial goods sector and materials & construction industry. The stock has a beta of 2.75 and a short float of 13.5% with 6.69 days to cover. Shares are up 6.6% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates USG as a

hold

. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and poor profit margins.

Highlights from the ratings report include:

  • USG's revenue growth has slightly outpaced the industry average of 5.4%. Since the same quarter one year prior, revenues slightly increased by 4.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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 gross profit margin for USG CORP is rather low; currently it is at 21.29%. Regardless of USG's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, USG's net profit margin of 5.29% compares favorably to the industry average.
  • The debt-to-equity ratio is very high at 3.46 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, USG's quick ratio is somewhat strong at 1.33, demonstrating the ability to handle short-term liquidity needs.

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