Valmont Industries (VMI) 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 Valmont Industries ( VMI) 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 Valmont Industries as such a stock due to the following factors:

  • VMI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $55.3 million.
  • VMI has traded 145,295 shares today.
  • VMI is trading at 1.57 times the normal volume for the stock at this time of day.
  • VMI 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 VMI:

Valmont Industries, Inc. produces and sells fabricated metal products in the United States, Australia, China, France, and internationally. It operates in four segments: Engineered Infrastructure Products, Utility Support Structures, Coatings, and Irrigation. The stock currently has a dividend yield of 0.7%. VMI has a PE ratio of 14.1. Currently there are 4 analysts that rate Valmont Industries a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Valmont Industries has been 264,300 shares per day over the past 30 days. Valmont has a market cap of $3.9 billion and is part of the industrial goods sector and industrial industry. The stock has a beta of 1.15 and a short float of 13.9% with 9.44 days to cover. Shares are down 2.4% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Valmont Industries 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, reasonable valuation levels, increase in stock price during the past year and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 17.6%. Since the same quarter one year prior, revenues slightly increased by 6.6%. 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.
  • The current debt-to-equity ratio, 0.32, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, VMI has a quick ratio of 2.43, which demonstrates the ability of the company to cover short-term liquidity needs.
  • VALMONT INDUSTRIES INC reported flat earnings per share in the most recent 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, VALMONT INDUSTRIES INC increased its bottom line by earning $8.75 versus $8.61 in the prior year. This year, the market expects an improvement in earnings ($10.90 versus $8.75).
  • 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 Machinery industry and the overall market, VALMONT INDUSTRIES INC's return on equity exceeds that of both the industry average and the S&P 500.

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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