Trade-Ideas: Apple (AAPL) 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 Apple ( AAPL) 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 Apple as such a stock due to the following factors:

  • AAPL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $7.0 billion.
  • AAPL has traded 10.5 million shares today.
  • AAPL is trading at 999999.00 times the normal volume for the stock at this time of day.
  • AAPL 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 AAPL:

Apple Inc., together with subsidiaries, designs, manufactures, and markets personal computers, mobile communication devices, and portable digital music and video players, as well as sells various related software, services, peripherals, and networking solutions. The stock currently has a dividend yield of 2.6%. AAPL has a PE ratio of 11.7. Currently there are 28 analysts that rate Apple a buy, no analysts rate it a sell, and 10 rate it a hold.

The average volume for Apple has been 12.6 million shares per day over the past 30 days. Apple has a market cap of $424.9 billion and is part of the consumer goods sector and consumer durables industry. The stock has a beta of 0.75 and a short float of 2.2% with 1.35 days to cover. Shares are down 12.1% 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 Apple 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, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • AAPL's revenue growth has slightly outpaced the industry average of 0.7%. Since the same quarter one year prior, revenues slightly increased by 0.8%. 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.
  • AAPL's debt-to-equity ratio is very low at 0.14 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, AAPL has a quick ratio of 1.54, which demonstrates the ability of the company to cover short-term liquidity needs.
  • 41.67% is the gross profit margin for APPLE INC which we consider to be strong. Regardless of AAPL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, AAPL's net profit margin of 19.53% compares favorably to the industry average.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Computers & Peripherals industry and the overall market, APPLE INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • APPLE INC's earnings per share declined by 19.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, APPLE INC increased its bottom line by earning $44.16 versus $27.67 in the prior year. For the next year, the market is expecting a contraction of 11.6% in earnings ($39.04 versus $44.16).

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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