Water-Logged And Getting Wetter: FirstEnergy (FE)

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 FirstEnergy ( FE) 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 FirstEnergy as such a stock due to the following factors:

  • FE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $85.6 million.
  • FE has traded 537,474 shares today.
  • FE traded in a range 209.1% of the normal price range with a price range of $1.19.
  • FE traded below its daily resistance level (quality: 17 days, meaning that the stock is crossing a resistance level set by the last 17 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 FE:

FirstEnergy Corp., a diversified energy holding company, engages in the generation, transmission, and distribution of electricity in the United States. The company operates in Regulated Distribution, Regulated Transmission, and Competitive Energy Services segments. The stock currently has a dividend yield of 4.5%. FE has a PE ratio of 132.1. Currently there are 2 analysts that rate FirstEnergy a buy, no analysts rate it a sell, and 10 rate it a hold.

The average volume for FirstEnergy has been 4.4 million shares per day over the past 30 days. FirstEnergy has a market cap of $13.3 billion and is part of the utilities sector and utilities industry. The stock has a beta of -0.02 and a short float of 2.1% with 3.18 days to cover. Shares are down 3.9% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates FirstEnergy as a hold. The company's strongest point has been its a solid financial position based on a variety of debt and liquidity measures that we have looked at. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:
  • FE, with its decline in revenue, slightly underperformed the industry average of 3.6%. Since the same quarter one year prior, revenues slightly dropped by 0.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • FIRSTENERGY CORP's earnings per share declined by 50.0% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, FIRSTENERGY CORP reported lower earnings of $1.81 versus $2.13 in the prior year. This year, the market expects an improvement in earnings ($3.00 versus $1.81).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Electric Utilities industry. The net income has significantly decreased by 48.7% when compared to the same quarter one year ago, falling from $425.00 million to $218.00 million.
  • The gross profit margin for FIRSTENERGY CORP is currently lower than what is desirable, coming in at 28.54%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 5.42% trails that of the industry average.
  • Net operating cash flow has declined marginally to $1,178.00 million or 2.96% 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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