Charles Schwab (SCHW) Falls Further As It's 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 Charles Schwab ( SCHW) 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 Charles Schwab as such a stock due to the following factors:

  • SCHW has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $184.5 million.
  • SCHW has traded 3.2 million shares today.
  • SCHW traded in a range 449.2% of the normal price range with a price range of $3.05.
  • SCHW traded below its daily resistance level (quality: 143 days, meaning that the stock is crossing a resistance level set by the last 143 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 SCHW:

The Charles Schwab Corporation, through its subsidiaries, provides securities brokerage, banking, money management, and financial advisory services. The company operates through two segments, Investor Services and Advisor Services. The stock currently has a dividend yield of 0.9%. SCHW has a PE ratio of 31.2. Currently there are 3 analysts that rate Charles Schwab a buy, 3 analysts rate it a sell, and 6 rate it a hold.

The average volume for Charles Schwab has been 7.5 million shares per day over the past 30 days. Charles Schwab has a market cap of $35.3 billion and is part of the financial sector and financial services industry. The stock has a beta of 1.56 and a short float of 2.2% with 3.81 days to cover. Shares are up 3.6% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Charles Schwab as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, compelling growth in net income, expanding profit margins and good cash flow from operations. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 5.2%. Since the same quarter one year prior, revenues rose by 13.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • SCHWAB (CHARLES) CORP 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, SCHWAB (CHARLES) CORP increased its bottom line by earning $0.78 versus $0.69 in the prior year. This year, the market expects an improvement in earnings ($0.95 versus $0.78).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 58.3% when compared to the same quarter one year prior, rising from $206.00 million to $326.00 million.
  • 39.07% is the gross profit margin for SCHWAB (CHARLES) CORP which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 21.66% is above that of the industry average.
  • Net operating cash flow has significantly increased by 118.75% to $69.00 million when compared to the same quarter last year. In addition, SCHWAB (CHARLES) CORP has also vastly surpassed the industry average cash flow growth rate of 14.98%.

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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