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

WEX

(

WEX

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

  • WEX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $56.3 million.
  • WEX has traded 227,802 shares today.
  • WEX traded in a range 231.7% of the normal price range with a price range of $4.44.
  • WEX traded below its daily resistance level (quality: 18 days, meaning that the stock is crossing a resistance level set by the last 18 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 WEX:

WEX Inc. provides corporate card payment solutions in North and South America, the Asia Pacific, and Europe. It operates in two segments, Fleet Payment Solutions and Other Payment Solutions. The Fleet Payment Solutions segment offers fleet vehicle payment and transaction processing services. WEX has a PE ratio of 24. Currently there are 4 analysts that rate WEX a buy, 1 analyst rates it a sell, and 5 rate it a hold.

The average volume for WEX has been 249,600 shares per day over the past 30 days. WEX has a market cap of $4.5 billion and is part of the services sector and diversified services industry. The stock has a beta of 2.07 and a short float of 5.2% with 3.83 days to cover. Shares are up 17.5% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates WEX as a

buy

. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, solid stock price performance, notable return on equity and expanding profit margins. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 22.6%. Since the same quarter one year prior, revenues rose by 11.1%. 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 significantly increased by 320.75% to $171.65 million when compared to the same quarter last year. In addition, WEX INC has also vastly surpassed the industry average cash flow growth rate of -10.73%.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the IT Services industry and the overall market on the basis of return on equity, WEX INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • 38.05% is the gross profit margin for WEX INC which we consider to be strong. Regardless of WEX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 11.04% trails the industry average.

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