Airgas (ARG) Spotted As Roof Leaker 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 Airgas ( ARG) 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 Airgas as such a stock due to the following factors:

  • ARG has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $63.7 million.
  • ARG has traded 14,068 shares today.
  • ARG is trading at 5.25 times the normal volume for the stock at this time of day.
  • ARG 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 ARG:

Airgas, Inc., together with its subsidiaries, supplies industrial, medical and specialty gases, and hardgoods. The company operates through two business segments, Distribution and All Other Operations. The stock currently has a dividend yield of 1.8%. ARG has a PE ratio of 23.5. Currently there are 5 analysts that rate Airgas a buy, 1 analyst rates it a sell, and 6 rate it a hold.

The average volume for Airgas has been 346,800 shares per day over the past 30 days. Airgas has a market cap of $7.9 billion and is part of the basic materials sector and chemicals industry. The stock has a beta of 0.53 and a short float of 2.4% with 2.56 days to cover. Shares are down 2.9% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Airgas as a buy. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income, revenue growth, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:
  • AIRGAS INC has improved earnings per share by 23.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, AIRGAS INC increased its bottom line by earning $4.36 versus $4.00 in the prior year. This year, the market expects an improvement in earnings ($4.92 versus $4.36).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Chemicals industry average. The net income increased by 17.2% when compared to the same quarter one year prior, going from $81.02 million to $94.98 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 5.9%. Since the same quarter one year prior, revenues slightly increased by 4.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Net operating cash flow has significantly increased by 80.95% to $210.50 million when compared to the same quarter last year. In addition, AIRGAS INC has also vastly surpassed the industry average cash flow growth rate of -10.65%.
  • The gross profit margin for AIRGAS INC is rather high; currently it is at 55.52%. 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 7.40% trails the industry average.

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