Roof Leaker To Watch: Colgate-Palmolive Company (CL)

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 Colgate-Palmolive Company ( CL) 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 Colgate-Palmolive Company as such a stock due to the following factors:

  • CL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $239.4 million.
  • CL has traded 99,614 shares today.
  • CL is trading at 17.99 times the normal volume for the stock at this time of day.
  • CL 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 CL:

Colgate-Palmolive Company, together with its subsidiaries, manufactures and markets consumer products worldwide. The company operates in two segments: Oral, Personal and Home Care; and Pet Nutrition. The stock currently has a dividend yield of 2.2%. CL has a PE ratio of 26.1. Currently there are 4 analysts that rate Colgate-Palmolive Company a buy, 1 analyst rates it a sell, and 12 rate it a hold.

The average volume for Colgate-Palmolive Company has been 2.8 million shares per day over the past 30 days. Colgate-Palmolive has a market cap of $58.2 billion and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 0.32 and a short float of 1% with 2.12 days to cover. Shares are down 5.5% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Colgate-Palmolive Company as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, expanding profit margins, good cash flow from operations and growth in earnings per share. 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:
  • CL's revenue growth has slightly outpaced the industry average of 0.8%. Since the same quarter one year prior, revenues slightly increased by 1.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Household Products industry and the overall market, COLGATE-PALMOLIVE CO's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for COLGATE-PALMOLIVE CO is rather high; currently it is at 61.48%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 14.91% is above that of the industry average.
  • Net operating cash flow has increased to $1,040.00 million or 10.63% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -22.31%.
  • COLGATE-PALMOLIVE CO's earnings per share improvement from the most recent quarter was slightly positive. 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, COLGATE-PALMOLIVE CO increased its bottom line by earning $2.58 versus $2.47 in the prior year. This year, the market expects an improvement in earnings ($2.83 versus $2.58).

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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