Time Warner (TWX) Shows 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 Time Warner ( TWX) 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 Time Warner as such a stock due to the following factors:

  • TWX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $271.6 million.
  • TWX has traded 3.4 million shares today.
  • TWX traded in a range 314.4% of the normal price range with a price range of $3.61.
  • TWX traded below its daily resistance level (quality: 20 days, meaning that the stock is crossing a resistance level set by the last 20 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 TWX:

Time Warner Inc. operates as a media and entertainment company in the United States and internationally. The company operates in four segments: Turner, Home Box Office, Warner Bros., and Time Inc. The stock currently has a dividend yield of 1.8%. TWX has a PE ratio of 16.0. Currently there are 13 analysts that rate Time Warner a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for Time Warner has been 5.3 million shares per day over the past 30 days. Time Warner has a market cap of $62.2 billion and is part of the services sector and media industry. The stock has a beta of 1.35 and a short float of 1.5% with 3.36 days to cover. Shares are up 1.7% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Time Warner as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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.
  • TIME WARNER 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, TIME WARNER INC increased its bottom line by earning $3.77 versus $3.00 in the prior year. This year, the market expects an improvement in earnings ($4.00 versus $3.77).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Media industry. The net income increased by 71.3% when compared to the same quarter one year prior, rising from $754.00 million to $1,292.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 14.9%. Since the same quarter one year prior, revenues slightly increased by 8.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.68, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.32, which illustrates the ability to avoid short-term cash problems.

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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