Roof Leaker To Watch: Stericycle Incorporated (SRCL)

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 Stericycle Incorporated ( SRCL) 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 Stericycle Incorporated as such a stock due to the following factors:

  • SRCL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $70.2 million.
  • SRCL has traded 663,582 shares today.
  • SRCL is trading at 4.62 times the normal volume for the stock at this time of day.
  • SRCL 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 SRCL:

Stericycle, Inc., together with its subsidiaries, provides regulated waste management and related services. SRCL has a PE ratio of 33.6. Currently there are 9 analysts that rate Stericycle Incorporated a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Stericycle Incorporated has been 402,600 shares per day over the past 30 days. Stericycle has a market cap of $10.0 billion and is part of the industrial goods sector and materials & construction industry. The stock has a beta of 0.45 and a short float of 2.1% with 2.93 days to cover. Shares are up 0.3% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Stericycle Incorporated as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and good cash flow from operations. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 5.8%. Since the same quarter one year prior, revenues rose by 11.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.82, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.05, which illustrates the ability to avoid short-term cash problems.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Commercial Services & Supplies industry and the overall market, STERICYCLE INC's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
  • 47.50% is the gross profit margin for STERICYCLE INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 15.06% is above that of the industry average.
  • Net operating cash flow has significantly increased by 79.74% to $158.80 million when compared to the same quarter last year. In addition, STERICYCLE INC has also vastly surpassed the industry average cash flow growth rate of -21.65%.

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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