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.

Trade-Ideas LLC identified

Cal-Maine Foods

(

CALM

) 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 Cal-Maine Foods as such a stock due to the following factors:

  • CALM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $84.1 million.
  • CALM has traded 1.4 million shares today.
  • CALM traded in a range 230.3% of the normal price range with a price range of $6.30.
  • CALM traded below its daily resistance level (quality: 12 days, meaning that the stock is crossing a resistance level set by the last 12 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 CALM:

Cal-Maine Foods, Inc. produces, grades, packages, markets, and distributes shell eggs. The stock currently has a dividend yield of 2.4%. CALM has a PE ratio of 19. Currently there are no analysts that rate Cal-Maine Foods a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Cal-Maine Foods has been 719,400 shares per day over the past 30 days. Cal-Maine has a market cap of $2.5 billion and is part of the consumer goods sector and food & beverage industry. The stock has a beta of 1.50 and a short float of 31.6% with 5.11 days to cover. Shares are up 47.2% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Cal-Maine Foods 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, notable return on equity, solid stock price performance and impressive record of earnings per share growth. We feel its strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 10.9%. Since the same quarter one year prior, revenues rose by 10.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • CALM's debt-to-equity ratio is very low at 0.08 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.53, which clearly demonstrates the ability to cover short-term cash needs.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Food Products industry and the overall market, CAL-MAINE FOODS INC's return on equity exceeds that of both the industry average and the S&P 500.
  • 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 66.36% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, CALM should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • CAL-MAINE FOODS INC has improved earnings per share by 18.6% 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, CAL-MAINE FOODS INC increased its bottom line by earning $2.26 versus $1.05 in the prior year. This year, the market expects an improvement in earnings ($3.27 versus $2.26).

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