AGCO (AGCO) Roof Leaking Today

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 AGCO ( AGCO) 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 AGCO as such a stock due to the following factors:

  • AGCO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $70.5 million.
  • AGCO has traded 37,983 shares today.
  • AGCO is trading at 20.40 times the normal volume for the stock at this time of day.
  • AGCO 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 AGCO:

AGCO Corporation manufactures and distributes agricultural equipment and related replacement parts worldwide. The stock currently has a dividend yield of 0.7%. AGCO has a PE ratio of 10.0. Currently there are 5 analysts that rate AGCO a buy, 2 analysts rate it a sell, and 5 rate it a hold.

The average volume for AGCO has been 1.2 million shares per day over the past 30 days. AGCO has a market cap of $5.5 billion and is part of the industrial goods sector and industrial industry. The stock has a beta of 2.05 and a short float of 6.4% with 4.70 days to cover. Shares are down 4.9% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates AGCO as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, attractive valuation levels, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 21.7%. Since the same quarter one year prior, revenues slightly increased by 7.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 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 Machinery industry average. The net income increased by 33.5% when compared to the same quarter one year prior, rising from $94.50 million to $126.20 million.
  • The current debt-to-equity ratio, 0.34, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that AGCO's debt-to-equity ratio is low, the quick ratio, which is currently 0.66, displays a potential problem in covering short-term cash needs.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen 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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