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 Family Dollar Stores ( FDO) 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 Family Dollar Stores as such a stock due to the following factors:
- FDO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $62.2 million.
- FDO has traded 904,015 shares today.
- FDO traded in a range 252.7% of the normal price range with a price range of $2.82.
- FDO traded below its daily resistance level (quality: 26 days, meaning that the stock is crossing a resistance level set by the last 26 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. EXCLUSIVE OFFER: Get the inside scoop on opportunities in FDO with the Ticky from Trade-Ideas. See the FREE profile for FDO NOW at Trade-Ideas More details on FDO: Family Dollar Stores, Inc. operates a chain of self-service retail discount stores primarily for low- and middle-income consumers in the United States. The stock currently has a dividend yield of 1.5%. FDO has a PE ratio of 18.1. Currently there are 2 analysts that rate Family Dollar Stores a buy, 2 analysts rate it a sell, and 17 rate it a hold. The average volume for Family Dollar Stores has been 1.1 million shares per day over the past 30 days. Family Dollar Stores has a market cap of $8.0 billion and is part of the services sector and retail industry. The stock has a beta of 0.39 and a short float of 4.9% with 5.73 days to cover. Shares are up 9% 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 Family Dollar Stores as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- FDO's revenue growth has slightly outpaced the industry average of 1.4%. Since the same quarter one year prior, revenues slightly increased by 5.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- FAMILY DOLLAR STORES has improved earnings per share by 27.5% 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. We feel that this trend should continue. During the past fiscal year, FAMILY DOLLAR STORES increased its bottom line by earning $3.83 versus $3.58 in the prior year. This year, the market expects an improvement in earnings ($4.00 versus $3.83).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Multiline Retail industry average. The net income increased by 26.3% when compared to the same quarter one year prior, rising from $80.93 million to $102.21 million.
- Net operating cash flow has increased to $146.62 million or 26.91% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -12.85%.
- The current debt-to-equity ratio, 0.32, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.24 is very weak and demonstrates a lack of ability to pay short-term obligations.
- You can view the full Family Dollar Stores 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.