Trade-Ideas: Cisco Systems (CSCO) 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 Cisco Systems ( CSCO) 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 Cisco Systems as such a stock due to the following factors:

  • CSCO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $777.9 million.
  • CSCO has traded 29.3 million shares today.
  • CSCO is trading at 7.35 times the normal volume for the stock at this time of day.
  • CSCO 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 CSCO:

Cisco Systems, Inc. designs, manufactures, and sells Internet protocol (IP) and other products related to the communications and information technology industry worldwide. The stock currently has a dividend yield of 2.8%. CSCO has a PE ratio of 13.0. Currently there are 23 analysts that rate Cisco Systems a buy, no analysts rate it a sell, and 7 rate it a hold.

The average volume for Cisco Systems has been 32.9 million shares per day over the past 30 days. Cisco Systems has a market cap of $129.4 billion and is part of the technology sector and computer hardware industry. The stock has a beta of 1.39 and a short float of 1.1% with 1.78 days to cover. Shares are up 22.9% 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 Cisco Systems 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, notable return on equity, attractive valuation levels and solid stock price performance. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:
  • CSCO's revenue growth trails the industry average of 29.6%. Since the same quarter one year prior, revenues slightly increased by 6.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Although CSCO's debt-to-equity ratio of 0.27 is very low, it is currently higher than that of the industry average. Along with this, the company maintains a quick ratio of 2.71, which clearly demonstrates the ability to cover short-term cash needs.
  • 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 Communications Equipment industry and the overall market, CISCO SYSTEMS INC's return on equity exceeds that of both the industry average and the S&P 500.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 25.66% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, CSCO should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.

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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