Clorox Company (CLX) Showing Signs Of Being A Roof Leaker

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 Clorox Company ( CLX) 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 Clorox Company as such a stock due to the following factors:

  • CLX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $129.5 million.
  • CLX has traded 43,341 shares today.
  • CLX is trading at 4.75 times the normal volume for the stock at this time of day.
  • CLX 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 CLX:

The Clorox Company manufactures and markets consumer and professional products worldwide. The stock currently has a dividend yield of 3.2%. CLX has a PE ratio of 20.4. Currently there is 1 analyst that rates Clorox Company a buy, 4 analysts rate it a sell, and 7 rate it a hold.

The average volume for Clorox Company has been 1.2 million shares per day over the past 30 days. Clorox has a market cap of $11.4 billion and is part of the consumer goods sector and consumer durables industry. The stock has a beta of 0.49 and a short float of 9.2% with 8.00 days to cover. Shares are down 6.1% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Clorox Company as a buy. The company's strengths can be seen in multiple areas, such as its notable return on equity, revenue growth, growth in earnings per share, increase in stock price during the past year 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:
  • Compared to other companies in the Household Products industry and the overall market, CLOROX CO/DE's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • CLX's revenue growth has slightly outpaced the industry average of 0.8%. Since the same quarter one year prior, revenues slightly increased by 1.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • CLOROX CO/DE'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, CLOROX CO/DE increased its bottom line by earning $4.32 versus $4.11 in the prior year. This year, the market expects an improvement in earnings ($4.55 versus $4.32).
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. 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.
  • 46.11% is the gross profit margin for CLOROX CO/DE which we consider to be strong. Regardless of CLX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 9.97% trails the industry average.

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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