Joy Global (JOY) 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 Joy Global ( JOY) 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 Joy Global as such a stock due to the following factors:

  • JOY has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $65.6 million.
  • JOY has traded 243,301 shares today.
  • JOY is trading at 1.69 times the normal volume for the stock at this time of day.
  • JOY 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 JOY:

Joy Global Inc. manufactures and services mining equipment for the extraction of coal, copper, iron ore, oil sands, gold, and other minerals. It operates in two segments, Underground Mining Machinery and Surface Mining Equipment. The stock currently has a dividend yield of 1.3%. JOY has a PE ratio of 11.0. Currently there are 9 analysts that rate Joy Global a buy, no analysts rate it a sell, and 9 rate it a hold.

The average volume for Joy Global has been 1.5 million shares per day over the past 30 days. Joy Global has a market cap of $5.6 billion and is part of the industrial goods sector and industrial industry. The stock has a beta of 2.19 and a short float of 17.6% with 15.39 days to cover. Shares are down 9.9% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Joy Global as a hold. 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 and notable return on equity. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and poor profit margins.

Highlights from the ratings report include:
  • The current debt-to-equity ratio, 0.46, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.09, which illustrates the ability to avoid short-term cash problems.
  • JOY, with its decline in revenue, slightly underperformed the industry average of 22.1%. Since the same quarter one year prior, revenues fell by 25.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for JOY GLOBAL INC is currently lower than what is desirable, coming in at 32.87%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.27% trails that of the industry average.
  • Net operating cash flow has declined marginally to $195.28 million or 5.01% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

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