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 Deere ( DE) 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 Deere as such a stock due to the following factors:
- DE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $347.5 million.
- DE has traded 236,452 shares today.
- DE is trading at 1.62 times the normal volume for the stock at this time of day.
- DE 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 DE with the Ticky from Trade-Ideas. See the FREE profile for DE NOW at Trade-Ideas More details on DE: Deere & Company manufactures and distributes agriculture and turf equipment, and construction and forestry equipment worldwide. The stock currently has a dividend yield of 2.5%. DE has a PE ratio of 9.1. Currently there are 2 analysts that rate Deere a buy, 7 analysts rate it a sell, and 9 rate it a hold. The average volume for Deere has been 3.0 million shares per day over the past 30 days. Deere has a market cap of $31.7 billion and is part of the industrial goods sector and industrial industry. The stock has a beta of 1.31 and a short float of 3.9% with 3.83 days to cover. Shares are down 1.2% year-to-date as of the close of trading on Wednesday. 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 Deere as a buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, good cash flow from operations, impressive record of earnings per share growth and notable return on equity. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated. Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has significantly exceeded that of the Machinery industry average, but is less than that of the S&P 500. The net income increased by 17.3% when compared to the same quarter one year prior, going from $687.60 million to $806.80 million.
- Net operating cash flow has increased to $2,666.50 million or 15.77% when compared to the same quarter last year. Despite an increase in cash flow, DEERE & CO's cash flow growth rate is still lower than the industry average growth rate of 34.67%.
- Despite the weak revenue results, DE has outperformed against the industry average of 21.5%. Since the same quarter one year prior, revenues slightly dropped by 3.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- DEERE & CO has improved earnings per share by 20.6% 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 two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, DEERE & CO increased its bottom line by earning $9.08 versus $7.64 in the prior year. For the next year, the market is expecting a contraction of 6.9% in earnings ($8.45 versus $9.08).
- 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. Compared to other companies in the Machinery industry and the overall market, DEERE & CO's return on equity significantly exceeds that of both the industry average and the S&P 500.
- You can view the full Deere 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.