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 Alcoa ( AA) 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 Alcoa as such a stock due to the following factors:
- AA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $248.3 million.
- AA has traded 36.6 million shares today.
- AA is trading at 1.90 times the normal volume for the stock at this time of day.
- AA 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 AA with the Ticky from Trade-Ideas. See the FREE profile for AA NOW at Trade-Ideas More details on AA: Alcoa Inc. engages in the production and management of primary aluminum, fabricated aluminum, and alumina. The company operates in four segments: Alumina, Primary Metals, Global Rolled Products, and Engineered Products and Solutions. The stock currently has a dividend yield of 1.4%. AA has a PE ratio of 63.8. Currently there are 4 analysts that rate Alcoa a buy, 4 analysts rate it a sell, and 6 rate it a hold. The average volume for Alcoa has been 19.6 million shares per day over the past 30 days. Alcoa has a market cap of $8.9 billion and is part of the basic materials sector and metals & mining industry. The stock has a beta of 1.80 and a short float of 11.5% with 3.94 days to cover. Shares are down 4.4% 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 Alcoa as a hold. Among the primary strengths of the company is its respectable return on equity which we feel is likely to continue. At the same time, however, we also find weaknesses including unimpressive growth in net income, poor profit margins and weak operating cash flow. Highlights from the ratings report include:
- AA, with its decline in revenue, slightly underperformed the industry average of 1.9%. Since the same quarter one year prior, revenues slightly dropped by 1.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, ALCOA INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- ALCOA INC's earnings have gone downhill when comparing its most recently reported quarter with the same quarter a year earlier. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ALCOA INC reported lower earnings of $0.17 versus $0.52 in the prior year. This year, the market expects an improvement in earnings ($0.30 versus $0.17).
- The gross profit margin for ALCOA INC is rather low; currently it is at 15.66%. Regardless of AA's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, AA's net profit margin of -2.03% significantly underperformed when compared to the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Metals & Mining industry. The net income has significantly decreased by 5850.0% when compared to the same quarter one year ago, falling from -$2.00 million to -$119.00 million.
- You can view the full Alcoa 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.