Water-Logged And Getting Wetter: Mead Johnson Nutrition (MJN)

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 Mead Johnson Nutrition ( MJN) 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 Mead Johnson Nutrition as such a stock due to the following factors:

  • MJN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $80.6 million.
  • MJN has traded 557,896 shares today.
  • MJN traded in a range 231.1% of the normal price range with a price range of $2.19.
  • MJN traded below its daily resistance level (quality: 10 days, meaning that the stock is crossing a resistance level set by the last 10 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 MJN:

Mead Johnson Nutrition Company manufactures, distributes, and sells infant formulas, children's nutrition, and other nutritional products. The stock currently has a dividend yield of 1.7%. MJN has a PE ratio of 27.2. Currently there are 6 analysts that rate Mead Johnson Nutrition a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Mead Johnson Nutrition has been 1.3 million shares per day over the past 30 days. Mead Johnson Nutrition has a market cap of $18.0 billion and is part of the consumer goods sector and food & beverage industry. The stock has a beta of 0.68 and a short float of 1.5% with 3.24 days to cover. Shares are up 7.2% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Mead Johnson Nutrition as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, expanding profit margins, increase in stock price during the past year and increase in net income. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:
  • MJN's revenue growth has slightly outpaced the industry average of 3.7%. Since the same quarter one year prior, revenues slightly increased by 7.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • MEAD JOHNSON NUTRITION CO has improved earnings per share by 8.7% 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, MEAD JOHNSON NUTRITION CO increased its bottom line by earning $3.26 versus $2.96 in the prior year. This year, the market expects an improvement in earnings ($3.70 versus $3.26).
  • The gross profit margin for MEAD JOHNSON NUTRITION CO is rather high; currently it is at 65.53%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 18.18% is above that of the industry average.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Food Products industry and the overall market, MEAD JOHNSON NUTRITION CO's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Food Products industry. The net income increased by 7.7% when compared to the same quarter one year prior, going from $188.00 million to $202.40 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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