AbbVie (ABBV) Spotted As Roof Leaker Today

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

  • ABBV has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $294.4 million.
  • ABBV has traded 7.7 million shares today.
  • ABBV is trading at 2.89 times the normal volume for the stock at this time of day.
  • ABBV 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 ABBV:

AbbVie Inc., a research-based biopharmaceutical company, is engaged in the discovery, development, manufacture, and sale of pharmaceutical products worldwide. The stock currently has a dividend yield of 3.2%. ABBV has a PE ratio of 20.7. Currently there are 4 analysts that rate AbbVie a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for AbbVie has been 6.6 million shares per day over the past 30 days. AbbVie has a market cap of $78.4 billion and is part of the health care sector and drugs industry. Shares are down 4.1% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates AbbVie as a hold. The company's strengths can be seen in multiple areas, such as its notable return on equity, solid stock price performance and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and generally higher debt management risk.

Highlights from the ratings report include:
  • Compared to other companies in the Pharmaceuticals industry and the overall market, ABBVIE INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has improved to $1,245.00 million from having none in the same quarter last year. Since the company had no net operating cash flow for the prior period, we cannot calculate a percent change in order to compare its growth rate with that of its industry average.
  • ABBVIE INC's earnings per share declined by 27.1% 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, ABBVIE INC increased its bottom line by earning $2.56 versus $0.96 in the prior year. This year, the market expects an improvement in earnings ($3.10 versus $2.56).
  • The debt-to-equity ratio is very high at 3.28 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Regardless of the company's weak debt-to-equity ratio, ABBV has managed to keep a strong quick ratio of 2.14, which demonstrates the ability to cover short-term cash needs.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Pharmaceuticals industry. The net income has significantly decreased by 26.7% when compared to the same quarter one year ago, falling from $1,539.64 million to $1,128.00 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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