Water-Logged And Getting Wetter: Moody's Corporation (MCO)

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 Moody's Corporation ( MCO) 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 Moody's Corporation as such a stock due to the following factors:

  • MCO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $91.6 million.
  • MCO has traded 835,970 shares today.
  • MCO traded in a range 250.9% of the normal price range with a price range of $3.04.
  • MCO traded below its daily resistance level (quality: 8 days, meaning that the stock is crossing a resistance level set by the last 8 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 MCO:

Moody's Corporation provides credit ratings; and credit, capital markets, and economic related research, data, and analytical tools worldwide. The stock currently has a dividend yield of 1.4%. MCO has a PE ratio of 23.0. Currently there are 5 analysts that rate Moody's Corporation a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Moody's Corporation has been 1.0 million shares per day over the past 30 days. Moody's has a market cap of $17.7 billion and is part of the services sector and diversified services industry. The stock has a beta of 1.54 and a short float of 3.7% with 6.37 days to cover. Shares are up 5.6% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Moody's Corporation as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, revenue growth 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:
  • Powered by its strong earnings growth of 34.28% and other important driving factors, this stock has surged by 64.64% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, MCO should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • MOODY'S CORP has improved earnings per share by 34.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, MOODY'S CORP increased its bottom line by earning $3.60 versus $3.03 in the prior year. This year, the market expects an improvement in earnings ($3.97 versus $3.60).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Diversified Financial Services industry average. The net income increased by 29.1% when compared to the same quarter one year prior, rising from $160.10 million to $206.70 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 5.5%. Since the same quarter one year prior, revenues slightly increased by 3.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Diversified Financial Services industry and the overall market, MOODY'S CORP's return on equity significantly 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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