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 "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) 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 $167.1 million.
- FDO has traded 4.3 million shares today.
- FDO is trading at 4.30 times the normal volume for the stock at this time of day.
- FDO crossed above its 200-day simple moving average.
'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success. 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 1.6%. FDO has a PE ratio of 17.3. Currently there is 1 analyst that rates Family Dollar Stores a buy, 3 analysts rate it a sell, and 16 rate it a hold. The average volume for Family Dollar Stores has been 1.2 million shares per day over the past 30 days. Family Dollar Stores has a market cap of $7.5 billion and is part of the services sector and retail industry. The stock has a beta of 0.39 and a short float of 5.6% with 2.16 days to cover. Shares are unchanged year-to-date as of the close of trading on Thursday. 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 3.0%. 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 -21.80%.
- 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.