Tenaris (TS) Is Today's Roof Leaker Stock

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

  • TS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $66.2 million.
  • TS has traded 935,473 shares today.
  • TS is trading at 20.26 times the normal volume for the stock at this time of day.
  • TS 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 TS:

Tenaris S.A., through its subsidiaries, engages in the steel pipe manufacturing and distribution activities. The stock currently has a dividend yield of 1.9%. TS has a PE ratio of 16.1. Currently there are 3 analysts that rate Tenaris a buy, 1 analyst rates it a sell, and 6 rate it a hold.

The average volume for Tenaris has been 939,500 shares per day over the past 30 days. Tenaris has a market cap of $27.3 billion and is part of the industrial goods sector and industrial industry. Shares are up 1.5% year-to-date as of the close of trading on Friday.

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 Tenaris as a buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, good cash flow from operations, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • TS's debt-to-equity ratio is very low at 0.10 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, TS has a quick ratio of 1.73, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has significantly increased by 52.27% to $753.17 million when compared to the same quarter last year. In addition, TENARIS SA has also vastly surpassed the industry average cash flow growth rate of -71.33%.
  • 41.70% is the gross profit margin for TENARIS SA which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 12.42% trails the industry average.
  • 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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