Today's Roof Leaker Stock Is SLM (SLM)

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

  • SLM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $129.5 million.
  • SLM has traded 1.8 million shares today.
  • SLM is trading at 1.51 times the normal volume for the stock at this time of day.
  • SLM 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 SLM:

SLM Corporation, also known as Sallie Mae, originates, acquires, finances, and services private education loans in the United States. The company operates through three segments: Consumer Lending, Business Services, and FFELP Loans. The stock currently has a dividend yield of 2.5%. SLM has a PE ratio of 8.5. Currently there are 4 analysts that rate SLM a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for SLM has been 3.0 million shares per day over the past 30 days. SLM has a market cap of $10.7 billion and is part of the financial sector and financial services industry. The stock has a beta of 1.21 and a short float of 3.1% with 2.58 days to cover. Shares are down 7.8% year-to-date as of the close of trading on Tuesday.

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 SLM as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, attractive valuation levels, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • Compared to its closing price of one year ago, SLM's share price has jumped by 56.87%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, SLM should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The gross profit margin for SLM CORP is rather high; currently it is at 67.60%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 17.50% is above that of the industry average.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Consumer Finance industry and the overall market on the basis of return on equity, SLM CORP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • SLM, with its decline in revenue, underperformed when compared the industry average of 4.5%. Since the same quarter one year prior, revenues slightly dropped by 6.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

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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