Eagle Materials (EXP) Showing 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 Eagle Materials ( EXP) 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 Eagle Materials as such a stock due to the following factors:

  • EXP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $49.4 million.
  • EXP has traded 635,455 shares today.
  • EXP traded in a range 204.7% of the normal price range with a price range of $4.80.
  • EXP traded below its daily resistance level (quality: 80 days, meaning that the stock is crossing a resistance level set by the last 80 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 EXP:

Eagle Materials Inc. manufactures and distributes building products used in residential, industrial, commercial, and infrastructure construction in the United States. The company operates in four segments: Cement, Gypsum Wallboard, Recycled Paperboard, and Concrete and Aggregates. The stock currently has a dividend yield of 0.5%. EXP has a PE ratio of 40.4. Currently there are 2 analysts that rate Eagle Materials a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Eagle Materials has been 709,900 shares per day over the past 30 days. Eagle has a market cap of $4.3 billion and is part of the industrial goods sector and materials & construction industry. The stock has a beta of 1.95 and a short float of 2.3% with 2.14 days to cover. Shares are up 7.3% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Eagle Materials as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 10.4%. Since the same quarter one year prior, revenues rose by 38.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.49, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.00, which illustrates the ability to avoid short-term cash problems.
  • Powered by its strong earnings growth of 70.27% and other important driving factors, this stock has surged by 27.97% over the past year, outperforming the rise in the S&P 500 Index during the same period. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
  • EAGLE MATERIALS INC 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. We feel that this trend should continue. During the past fiscal year, EAGLE MATERIALS INC increased its bottom line by earning $1.24 versus $0.43 in the prior year. This year, the market expects an improvement in earnings ($2.57 versus $1.24).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Construction Materials industry. The net income increased by 75.9% when compared to the same quarter one year prior, rising from $17.98 million to $31.62 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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