Roof Leaker To Watch: CenterPoint Energy (CNP)

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 CenterPoint Energy ( CNP) 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 CenterPoint Energy as such a stock due to the following factors:

  • CNP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $105.0 million.
  • CNP has traded 2.2 million shares today.
  • CNP is trading at 1.83 times the normal volume for the stock at this time of day.
  • CNP 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 CNP:

CenterPoint Energy, Inc. operates as a public utility holding company in the United States. The stock currently has a dividend yield of 3.9%. CNP has a PE ratio of 31.7. Currently there are 3 analysts that rate CenterPoint Energy a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for CenterPoint Energy has been 3.7 million shares per day over the past 30 days. CenterPoint Energy has a market cap of $10.5 billion and is part of the utilities sector and utilities industry. The stock has a beta of 0.32 and a short float of 2.4% with 2.19 days to cover. Shares are up 5.2% 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 CenterPoint Energy as a buy. The company's strengths can be seen in multiple areas, such as its increase in net income, increase in stock price during the past year and growth in earnings per share. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Multi-Utilities industry. The net income increased by 1410.0% when compared to the same quarter one year prior, rising from $10.00 million to $151.00 million.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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.
  • CENTERPOINT ENERGY INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. 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, CENTERPOINT ENERGY INC reported lower earnings of $0.96 versus $1.80 in the prior year. This year, the market expects an improvement in earnings ($1.21 versus $0.96).
  • Despite the weak revenue results, CNP has outperformed against the industry average of 32.9%. Since the same quarter one year prior, revenues slightly dropped by 3.8%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • 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 Multi-Utilities industry and the overall market on the basis of return on equity, CENTERPOINT ENERGY INC has outperformed in comparison with the industry average, but has underperformed when compared to that of 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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