Roof Leaker To Watch: Northern Trust Corporation (NTRS)

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 Northern Trust Corporation ( NTRS) 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 Northern Trust Corporation as such a stock due to the following factors:

  • NTRS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $89.9 million.
  • NTRS has traded 1.4 million shares today.
  • NTRS is trading at 3.21 times the normal volume for the stock at this time of day.
  • NTRS 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 NTRS:

Northern Trust Corporation, through its subsidiaries, provides investment management, asset and fund administration, banking solutions, and fiduciary services for corporations, institutions, and affluent individuals worldwide. The stock currently has a dividend yield of 2%. NTRS has a PE ratio of 21.1. Currently there are 2 analysts that rate Northern Trust Corporation a buy, 5 analysts rate it a sell, and 8 rate it a hold.

The average volume for Northern Trust Corporation has been 1.2 million shares per day over the past 30 days. Northern Trust has a market cap of $14.4 billion and is part of the financial sector and financial services industry. The stock has a beta of 1.29 and a short float of 1.8% with 2.50 days to cover. Shares are down 1.1% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Northern Trust Corporation as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, expanding profit margins, increase in stock price during the past year and increase in net income. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 7.7%. Since the same quarter one year prior, revenues slightly increased by 5.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • NORTHERN TRUST CORP's earnings per share improvement from the most recent quarter was slightly positive. 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, NORTHERN TRUST CORP increased its bottom line by earning $2.99 versus $2.81 in the prior year. This year, the market expects an improvement in earnings ($3.40 versus $2.99).
  • The gross profit margin for NORTHERN TRUST CORP is currently very high, coming in at 94.76%. 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 15.45% trails the industry average.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Capital Markets industry. The net income increased by 1.2% when compared to the same quarter one year prior, going from $167.70 million to $169.70 million.

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