Trade-Ideas LLC identified

Vulcan Materials

(

VMC

) 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 Vulcan Materials as such a stock due to the following factors:

  • VMC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $125.2 million.
  • VMC has traded 1.5 million shares today.
  • VMC is trading at 1.52 times the normal volume for the stock at this time of day.
  • VMC 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 VMC:

Vulcan Materials Company produces and sells construction aggregates, asphalt mix, and ready-mixed concrete primarily in the United States. It operates through four segments: Aggregates, Asphalt Mix, Concrete, and Calcium. The stock currently has a dividend yield of 0.4%. VMC has a PE ratio of 102. Currently there are 7 analysts that rate Vulcan Materials a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Vulcan Materials has been 1.2 million shares per day over the past 30 days. Vulcan has a market cap of $12.3 billion and is part of the industrial goods sector and materials & construction industry. The stock has a beta of 0.86 and a short float of 2.9% with 2.16 days to cover. Shares are up 31.8% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Vulcan Materials as a

buy

. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, good cash flow from operations, solid stock price performance and increase in net income. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 3.4%. Since the same quarter one year prior, revenues rose by 13.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • VULCAN MATERIALS CO has improved earnings per share by 5.7% 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, VULCAN MATERIALS CO increased its bottom line by earning $1.56 versus $0.16 in the prior year. This year, the market expects an improvement in earnings ($2.10 versus $1.56).
  • Net operating cash flow has significantly increased by 63.18% to $45.48 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 37.91%.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Construction Materials industry average. The net income increased by 4.8% when compared to the same quarter one year prior, going from $45.97 million to $48.16 million.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 47.42% over the past year, a rise that has exceeded that of the S&P 500 Index. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.

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