E*Trade Financial (ETFC) Falls Further As It's Water-Logged And Getting Wetter

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 E*Trade Financial ( ETFC) 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 E*Trade Financial as such a stock due to the following factors:

  • ETFC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $101.7 million.
  • ETFC has traded 5.0 million shares today.
  • ETFC traded in a range 208.9% of the normal price range with a price range of $1.55.
  • ETFC traded below its daily resistance level (quality: 30 days, meaning that the stock is crossing a resistance level set by the last 30 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 ETFC:

E*TRADE Financial Corporation, a financial services company, provides brokerage and related products and services primarily to individual retail investors under the E*TRADE Financial brand name in the United States. ETFC has a PE ratio of 84.2. Currently there are 3 analysts that rate E*Trade Financial a buy, 2 analysts rate it a sell, and 4 rate it a hold.

The average volume for E*Trade Financial has been 3.9 million shares per day over the past 30 days. E*Trade Financial has a market cap of $6.9 billion and is part of the financial sector and financial services industry. The stock has a beta of 2.39 and a short float of 3.9% with 2.62 days to cover. Shares are up 20.7% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates E*Trade Financial as a buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, good cash flow from operations, expanding profit margins and solid stock price performance. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the ratings report include:
  • E TRADE FINANCIAL CORP 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 year. We feel that this trend should continue. During the past fiscal year, E TRADE FINANCIAL CORP turned its bottom line around by earning $0.29 versus -$0.39 in the prior year. This year, the market expects an improvement in earnings ($0.91 versus $0.29).
  • 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 131.1% when compared to the same quarter one year prior, rising from -$186.06 million to $57.86 million.
  • Net operating cash flow has significantly increased by 144.19% to $228.58 million when compared to the same quarter last year. In addition, E TRADE FINANCIAL CORP has also vastly surpassed the industry average cash flow growth rate of 93.28%.
  • 44.06% is the gross profit margin for E TRADE FINANCIAL CORP which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 11.41% trails the industry average.
  • Powered by its strong earnings growth of 130.76% and other important driving factors, this stock has surged by 114.08% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

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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