Lorillard (LO) Is Today's Water-Logged And Getting Wetter Stock

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 Lorillard ( LO) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Lorillard as such a stock due to the following factors:

  • LO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $158.2 million.
  • LO has traded 763,988 shares today.
  • LO traded in a range 217.3% of the normal price range with a price range of $2.17.
  • LO traded below its daily resistance level (quality: 117 days, meaning that the stock is crossing a resistance level set by the last 117 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on LO:

Lorillard, Inc. manufactures and sells cigarettes in the United States. The company operates through two segments, Cigarettes and Electronic Cigarettes. The Cigarettes segment manufactures and sells cigarettes. The stock currently has a dividend yield of 4.5%. LO has a PE ratio of 15.6. Currently there are 3 analysts that rate Lorillard a buy, 1 analyst rates it a sell, and 5 rate it a hold.

The average volume for Lorillard has been 3.2 million shares per day over the past 30 days. Lorillard has a market cap of $18.2 billion and is part of the consumer goods sector and tobacco industry. The stock has a beta of 0.32 and a short float of 6.2% with 5.50 days to cover. Shares are down 1.4% year-to-date as of the close of trading on Tuesday.

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 Lorillard as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 3.1%. Since the same quarter one year prior, revenues rose by 12.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • LORILLARD INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, LORILLARD INC increased its bottom line by earning $2.81 versus $2.67 in the prior year. This year, the market expects an improvement in earnings ($3.17 versus $2.81).
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. 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.
  • The gross profit margin for LORILLARD INC is rather high; currently it is at 51.83%. Regardless of LO'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 19.69% trails the industry average.
  • Net operating cash flow has declined marginally to $553.00 million or 4.32% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

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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