Constellation Brands (STZ) Shows Signs Of Being 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 Constellation Brands ( STZ) 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 Constellation Brands as such a stock due to the following factors:

  • STZ has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $121.3 million.
  • STZ has traded 1.8 million shares today.
  • STZ traded in a range 279.8% of the normal price range with a price range of $4.80.
  • STZ traded below its daily resistance level (quality: 36 days, meaning that the stock is crossing a resistance level set by the last 36 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 STZ:

Constellation Brands, Inc., together with its subsidiaries, produces and markets beverage alcohol. STZ has a PE ratio of 8.7. Currently there are 5 analysts that rate Constellation Brands a buy, 1 analyst rates it a sell, and 1 rates it a hold.

The average volume for Constellation Brands has been 1.4 million shares per day over the past 30 days. Constellation has a market cap of $13.5 billion and is part of the consumer goods sector and food & beverage industry. The stock has a beta of 1.16 and a short float of 1.8% with 1.69 days to cover. Shares are up 15.8% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Constellation Brands as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity, reasonable valuation levels, solid stock price performance and compelling growth in net income. 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:
  • STZ's very impressive revenue growth greatly exceeded the industry average of 4.0%. Since the same quarter one year prior, revenues leaped by 88.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 84.48% and other important driving factors, this stock has surged by 75.57% 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, STZ should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • 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 Beverages industry and the overall market, CONSTELLATION BRANDS's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Beverages industry. The net income increased by 92.7% when compared to the same quarter one year prior, rising from $109.50 million to $211.00 million.

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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