KKR (KKR) Is Today's Roof Leaker Stock

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

  • KKR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $51.0 million.
  • KKR has traded 3.9 million shares today.
  • KKR is trading at 3.37 times the normal volume for the stock at this time of day.
  • KKR 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 KKR:

Kohlberg Kravis Roberts & Co. is a private equity investment firm specializing in acquisitions, leveraged buyouts, management buyouts, special situations, growth equity, mature, distressed, and middle market investments. The stock currently has a dividend yield of 6%. KKR has a PE ratio of 10.2. Currently there are 9 analysts that rate KKR a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for KKR has been 2.3 million shares per day over the past 30 days. KKR has a market cap of $6.6 billion and is part of the financial sector and financial services industry. The stock has a beta of 2.21 and a short float of 4.4% with 5.43 days to cover. Shares are down 6.8% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates KKR as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, compelling growth in net income, attractive valuation levels 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:
  • 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. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • KKR & CO LP reported significant earnings per share improvement 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, KKR & CO LP increased its bottom line by earning $2.29 versus $2.23 in the prior year. This year, the market expects an improvement in earnings ($2.39 versus $2.29).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 187.3% when compared to the same quarter one year prior, rising from $96.73 million to $277.91 million.
  • KKR, with its decline in revenue, underperformed when compared the industry average of 16.8%. Since the same quarter one year prior, revenues fell by 29.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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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