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 "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 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 $353.2 million.
- LULU has traded 2.3 million shares today.
- LULU is trading at 1.76 times the normal volume for the stock at this time of day.
- LULU 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. 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 35.3. Currently there are 10 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 2.7 million shares per day over the past 30 days. Lululemon has a market cap of $7.4 billion and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 1.66 and a short float of 17.6% with 4.15 days to cover. Shares are down 14.4% year to date as of the close of trading on Friday. 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, 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:
- The revenue growth came in higher than the industry average of 3.7%. Since the same quarter one year prior, revenues rose by 21.9%. 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.
- 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 ($1.98 versus $1.85).
- The gross profit margin for LULULEMON ATHLETICA INC is rather high; currently it is at 53.98%. 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 16.38% compares favorably to the industry average.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Textiles, Apparel & Luxury Goods industry and the overall market, LULULEMON ATHLETICA INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- 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.