Computer Sciences Corporation (CSC) Showing Signs Of Being Water-Logged And Getting Wetter

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 Computer Sciences Corporation ( CSC) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Computer Sciences Corporation as such a stock due to the following factors:

  • CSC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $41.5 million.
  • CSC has traded 1.1 million shares today.
  • CSC traded in a range 206.5% of the normal price range with a price range of $1.64.
  • CSC traded below its daily resistance level (quality: 91 days, meaning that the stock is crossing a resistance level set by the last 91 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on CSC:

Computer Sciences Corporation provides information technology (IT) and professional services and solutions in North America, Europe, Asia, and Australia. The stock currently has a dividend yield of 1.5%. CSC has a PE ratio of 12.9. Currently there are 4 analysts that rate Computer Sciences Corporation a buy, 1 analyst rates it a sell, and 6 rate it a hold.

The average volume for Computer Sciences Corporation has been 1.1 million shares per day over the past 30 days. Computer Sciences has a market cap of $7.7 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 1.63 and a short float of 1.5% with 2.62 days to cover. Shares are up 29.6% year to date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Computer Sciences Corporation as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including poor profit margins and weak operating cash flow.

Highlights from the ratings report include:
  • Powered by its strong earnings growth of 810.00% and other important driving factors, this stock has surged by 68.19% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • COMPUTER SCIENCES CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, COMPUTER SCIENCES CORP turned its bottom line around by earning $3.03 versus -$28.31 in the prior year. This year, the market expects an improvement in earnings ($3.68 versus $3.03).
  • CSC's debt-to-equity ratio of 0.87 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that CSC's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.56 is high and demonstrates strong liquidity.
  • Net operating cash flow has declined marginally to $213.00 million or 3.61% when compared to the same quarter last year. Despite a decrease in cash flow COMPUTER SCIENCES CORP is still fairing well by exceeding its industry average cash flow growth rate of -17.64%.
  • The gross profit margin for COMPUTER SCIENCES CORP is rather low; currently it is at 24.36%. Regardless of CSC's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, CSC's net profit margin of 4.78% is significantly lower than the industry average.

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