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 PetSmart ( PETM) 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 PetSmart as such a stock due to the following factors:
- PETM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $100.1 million.
- PETM has traded 2.4 million shares today.
- PETM traded in a range 231.3% of the normal price range with a price range of $2.65.
- PETM traded below its daily resistance level (quality: 105 days, meaning that the stock is crossing a resistance level set by the last 105 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. EXCLUSIVE OFFER: Get the inside scoop on opportunities in PETM with the Ticky from Trade-Ideas. See the FREE profile for PETM NOW at Trade-Ideas More details on PETM: PetSmart, Inc., together with its subsidiaries, operates as a specialty retailer of products, services, and solutions for pets in the United States, Puerto Rico, and Canada. The stock currently has a dividend yield of 1.2%. PETM has a PE ratio of 16.2. Currently there are 2 analysts that rate PetSmart a buy, 2 analysts rate it a sell, and 14 rate it a hold. The average volume for PetSmart has been 1.7 million shares per day over the past 30 days. PetSmart has a market cap of $6.4 billion and is part of the services sector and specialty retail industry. The stock has a beta of 0.43 and a short float of 17.1% with 10.49 days to cover. Shares are down 10.3% year-to-date as of the close of trading on Monday. STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more. TheStreetRatings.com Analysis: TheStreet Quant Ratings rates PetSmart as a buy. The company's strengths can be seen in multiple areas, such as its notable return on equity, good cash flow from operations, growth in earnings per share and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows low profit margins. Highlights from the ratings report include:
- 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 Specialty Retail industry and the overall market, PETSMART INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has slightly increased to $273.91 million or 2.81% when compared to the same quarter last year. In addition, PETSMART INC has also modestly surpassed the industry average cash flow growth rate of -4.54%.
- PETSMART INC'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, PETSMART INC increased its bottom line by earning $4.03 versus $3.55 in the prior year. This year, the market expects an improvement in earnings ($4.47 versus $4.03).
- The current debt-to-equity ratio, 0.50, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that PETM's debt-to-equity ratio is low, the quick ratio, which is currently 0.54, displays a potential problem in covering short-term cash needs.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 4.6%. Since the same quarter one year prior, revenues slightly dropped by 4.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full PetSmart Ratings Report.
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.