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 CarMax ( KMX) 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 CarMax as such a stock due to the following factors:
- KMX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $60.5 million.
- KMX has traded 890,906 shares today.
- KMX traded in a range 244.9% of the normal price range with a price range of $1.48.
- KMX traded below its daily resistance level (quality: 9 days, meaning that the stock is crossing a resistance level set by the last 9 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 KMX with the Ticky from Trade-Ideas. See the FREE profile for KMX NOW at Trade-Ideas More details on KMX: CarMax, Inc., through its subsidiaries, operates as a retailer of used vehicles in the United States. It operates in two segments, CarMax Sales Operations and CarMax Auto Finance. KMX has a PE ratio of 21.4. Currently there are 6 analysts that rate CarMax a buy, no analysts rate it a sell, and 3 rate it a hold. The average volume for CarMax has been 1.6 million shares per day over the past 30 days. CarMax has a market cap of $10.2 billion and is part of the services sector and specialty retail industry. The stock has a beta of 1.35 and a short float of 5.8% with 8.71 days to cover. Shares are down 2.8% year-to-date as of the close of trading on Wednesday. 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 CarMax as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 2.0%. Since the same quarter one year prior, revenues slightly increased by 8.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has significantly increased by 57.01% to -$120.02 million when compared to the same quarter last year. In addition, CARMAX INC has also vastly surpassed the industry average cash flow growth rate of -15.13%.
- CARMAX INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CARMAX INC increased its bottom line by earning $2.17 versus $1.87 in the prior year. This year, the market expects an improvement in earnings ($2.45 versus $2.17).
- 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 on the basis of return on equity, CARMAX INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- In its most recent trading session, KMX has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- You can view the full CarMax 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.