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

  • SAP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $139.6 million.
  • SAP has traded 41,091 shares today.
  • SAP is trading at 3.97 times the normal volume for the stock at this time of day.
  • SAP 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 SAP:

SAP AG provides enterprise application software and software-related services worldwide. It offers products in applications, analytics, cloud, mobile, and database and technology categories. The stock currently has a dividend yield of 1%. SAP has a PE ratio of 21.2. Currently there are 6 analysts that rate Sap a buy, 1 analyst rates it a sell, and 7 rate it a hold.

The average volume for Sap has been 1.0 million shares per day over the past 30 days. Sap has a market cap of $95.1 billion and is part of the technology sector and computer software & services industry. Shares are down 11.1% 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 Sap as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, compelling growth in net income, expanding profit margins 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:
  • SAP's revenue growth has slightly outpaced the industry average of 4.9%. Since the same quarter one year prior, revenues rose by 12.7%. 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 Software industry average. The net income increased by 34.3% when compared to the same quarter one year prior, rising from $816.54 million to $1,096.68 million.
  • The gross profit margin for SAP AG is currently very high, coming in at 75.10%. 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 18.65% 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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