Trade-Ideas: Staples (SPLS) Is Today's

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 Staples ( SPLS) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Staples as such a stock due to the following factors:

  • SPLS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $182.5 million.
  • SPLS has traded 9.1 million shares today.
  • SPLS is trading at 2.23 times the normal volume for the stock at this time of day.
  • SPLS crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on SPLS:

Staples, Inc., together with its subsidiaries, operates as an office products company. It operates in three segments: North American Stores & Online, North American Commercial, and International Operations. The stock currently has a dividend yield of 3.4%. Currently there are 6 analysts that rate Staples a buy, 1 analyst rates it a sell, and 8 rate it a hold.

The average volume for Staples has been 7.5 million shares per day over the past 30 days. Staples has a market cap of $9.3 billion and is part of the services sector and specialty retail industry. The stock has a beta of 1.54 and a short float of 8.8% with 4.50 days to cover. Shares are up 23.9% year to date as of the close of trading on Thursday.

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 Staples as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:
  • Compared to its closing price of one year ago, SPLS's share price has jumped by 29.13%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • The current debt-to-equity ratio, 0.33, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that SPLS's debt-to-equity ratio is low, the quick ratio, which is currently 0.67, displays a potential problem in covering short-term cash needs.
  • SPLS, with its decline in revenue, underperformed when compared the industry average of 22.6%. Since the same quarter one year prior, revenues slightly dropped by 2.2%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • The gross profit margin for STAPLES INC is currently lower than what is desirable, coming in at 27.49%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.92% trails that of the industry average.
  • Net operating cash flow has significantly decreased to -$0.00 million or 100.00% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

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