Kohl's (KSS) 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 Kohl's ( KSS) 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 Kohl's as such a stock due to the following factors:

  • KSS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $131.5 million.
  • KSS has traded 4.5 million shares today.
  • KSS is trading at 2.29 times the normal volume for the stock at this time of day.
  • KSS 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 KSS:

Kohl's Corporation operates department stores in the United States. It offers exclusive and national brand apparel, footwear, accessories, beauty, and soft home products to children, men, and women customers. The stock currently has a dividend yield of 2.8%. KSS has a PE ratio of 13.7. Currently there are 9 analysts that rate Kohl's a buy, 2 analysts rate it a sell, and 6 rate it a hold.

The average volume for Kohl's has been 2.5 million shares per day over the past 30 days. Kohl's has a market cap of $11.6 billion and is part of the services sector and retail industry. The stock has a beta of 0.85 and a short float of 11.2% with 8.18 days to cover. Shares are down 1.5% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Kohl's as a buy. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, good cash flow from operations, increase in stock price during the past year and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • Net operating cash flow has significantly increased by 54.80% to $870.00 million when compared to the same quarter last year. In addition, KOHL'S CORP has also vastly surpassed the industry average cash flow growth rate of -3.65%.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The debt-to-equity ratio is somewhat low, currently at 0.81, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.35 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 10.7%. Since the same quarter one year prior, revenues slightly dropped by 3.8%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.

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