Today's Water-Logged And Getting Wetter Stock: Chubb (CB)

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

  • CB has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $152.6 million.
  • CB has traded 70,494 shares today.
  • CB traded in a range 289.4% of the normal price range with a price range of $2.61.
  • CB traded below its daily resistance level (quality: 13 days, meaning that the stock is crossing a resistance level set by the last 13 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 CB:

The Chubb Corporation, through its subsidiaries, provides property and casualty insurance to businesses and individuals. The stock currently has a dividend yield of 2.3%. CB has a PE ratio of 9.6. Currently there are 3 analysts that rate Chubb a buy, 1 analyst rates it a sell, and 11 rate it a hold.

The average volume for Chubb has been 1.5 million shares per day over the past 30 days. Chubb has a market cap of $22.2 billion and is part of the financial sector and insurance industry. The stock has a beta of 0.75 and a short float of 1.6% with 2.31 days to cover. Shares are down 6.4% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Chubb as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, impressive record of earnings per share growth and compelling growth 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 12.8%. Since the same quarter one year prior, revenues slightly increased by 2.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • CB's debt-to-equity ratio is very low at 0.21 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Insurance industry and the overall market, CHUBB CORP's return on equity exceeds that of both the industry average and the S&P 500.
  • CHUBB 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 two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, CHUBB CORP increased its bottom line by earning $9.03 versus $5.67 in the prior year. For the next year, the market is expecting a contraction of 19.1% in earnings ($7.30 versus $9.03).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Insurance industry average, but is greater than that of the S&P 500. The net income increased by 457.8% when compared to the same quarter one year prior, rising from $102.00 million to $569.00 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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