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 Caterpillar ( CAT) 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 Caterpillar as such a stock due to the following factors:
- CAT has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $443.3 million.
- CAT has traded 3.3 million shares today.
- CAT is trading at 4.70 times the normal volume for the stock at this time of day.
- CAT 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. EXCLUSIVE OFFER: Get the inside scoop on opportunities in CAT with the Ticky from Trade-Ideas. See the FREE profile for CAT NOW at Trade-Ideas More details on CAT: Caterpillar Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. The stock currently has a dividend yield of 2.8%. CAT has a PE ratio of 13.7. Currently there are 9 analysts that rate Caterpillar a buy, no analysts rate it a sell, and 8 rate it a hold. The average volume for Caterpillar has been 6.0 million shares per day over the past 30 days. Caterpillar has a market cap of $56.4 billion and is part of the industrial goods sector and industrial industry. The stock has a beta of 1.88 and a short float of 5.3% with 6.12 days to cover. Shares are down 2.8% 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 Caterpillar as a buy. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, notable return on equity and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- Net operating cash flow has significantly increased by 88.96% to $3,169.00 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 64.15%.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 17.8%. Since the same quarter one year prior, revenues fell by 15.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- In its most recent trading session, CAT has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. When compared to other companies in the Machinery industry and the overall market, CATERPILLAR INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- CATERPILLAR INC's earnings per share declined by 42.9% 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, CATERPILLAR INC increased its bottom line by earning $8.49 versus $7.39 in the prior year. For the next year, the market is expecting a contraction of 25.5% in earnings ($6.33 versus $8.49).
- You can view the full Caterpillar 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.