Water-Logged And Getting Wetter Stock Of The Day: Armstrong World Industries (AWI)

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 Armstrong World Industries ( AWI) 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 Armstrong World Industries as such a stock due to the following factors:

  • AWI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $41.0 million.
  • AWI has traded 2.8 million shares today.
  • AWI traded in a range 203% of the normal price range with a price range of $3.54.
  • AWI traded below its daily resistance level (quality: 20 days, meaning that the stock is crossing a resistance level set by the last 20 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 AWI:

Armstrong World Industries, Inc. engages in the design, manufacture, and sale of flooring products and ceiling systems worldwide. AWI has a PE ratio of 36.0. Currently there are 5 analysts that rate Armstrong World Industries a buy, 1 analyst rates it a sell, and 4 rate it a hold.

The average volume for Armstrong World Industries has been 696,100 shares per day over the past 30 days. Armstrong World has a market cap of $3.2 billion and is part of the industrial goods sector and materials & construction industry. The stock has a beta of 1.27 and a short float of 8.5% with 2.18 days to cover. Shares are up 2.9% year-to-date as of the close of trading on Friday.

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 Armstrong World Industries as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, increase in stock price during the past year and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • AWI's revenue growth has slightly outpaced the industry average of 2.9%. Since the same quarter one year prior, revenues slightly increased by 5.0%. 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.
  • Net operating cash flow has slightly increased to $118.50 million or 6.56% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -6.17%.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Building Products industry and the overall market, ARMSTRONG WORLD INDUSTRIES's return on equity exceeds that of both the industry average and the S&P 500.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • ARMSTRONG WORLD INDUSTRIES's earnings per share declined by 24.2% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ARMSTRONG WORLD INDUSTRIES increased its bottom line by earning $2.41 versus $1.91 in the prior year. For the next year, the market is expecting a contraction of 11.6% in earnings ($2.13 versus $2.41).

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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