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 Lululemon Athletica ( LULU) 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 Lululemon Athletica as such a stock due to the following factors:
- LULU has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $122.1 million.
- LULU has traded 1.1 million shares today.
- LULU traded in a range 212.9% of the normal price range with a price range of $3.51.
- LULU traded below its daily resistance level (quality: 26 days, meaning that the stock is crossing a resistance level set by the last 26 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. EXCLUSIVE OFFER: Get the inside scoop on opportunities in LULU with the Ticky from Trade-Ideas. See the FREE profile for LULU NOW at Trade-Ideas More details on LULU: lululemon athletica inc., together with its subsidiaries, designs, manufactures, and distributes athletic apparel and accessories for women, men, and female youth. It operates in three segments: Corporate-Owned Stores, Direct To Consumer, and Other. LULU has a PE ratio of 37.9. Currently there are 9 analysts that rate Lululemon Athletica a buy, 3 analysts rate it a sell, and 13 rate it a hold. The average volume for Lululemon Athletica has been 3.2 million shares per day over the past 30 days. Lululemon has a market cap of $8.0 billion and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 1.87 and a short float of 16.4% with 10.73 days to cover. Shares are down 8% year to date as of the close of trading on Monday. STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more. TheStreetRatings.com Analysis: TheStreet Quant Ratings rates Lululemon Athletica as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 5.1%. Since the same quarter one year prior, revenues rose by 21.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- LULU has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 6.46, which clearly demonstrates the ability to cover short-term cash needs.
- Net operating cash flow has significantly increased by 57.56% to $25.14 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 14.90%.
- LULULEMON ATHLETICA INC reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, LULULEMON ATHLETICA INC increased its bottom line by earning $1.85 versus $1.27 in the prior year. This year, the market expects an improvement in earnings ($2.00 versus $1.85).
- The gross profit margin for LULULEMON ATHLETICA INC is rather high; currently it is at 52.77%. Regardless of LULU's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, LULU's net profit margin of 13.67% compares favorably to the industry average.
- You can view the full Lululemon Athletica Ratings Report.
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.