Trade-Ideas: Aflac (AFL) Is Today's

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 Aflac ( AFL) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Aflac as such a stock due to the following factors:

  • AFL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $90.7 million.
  • AFL has traded 315,125 shares today.
  • AFL is trading at 1.84 times the normal volume for the stock at this time of day.
  • AFL crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on AFL:

Aflac Incorporated, through its subsidiary, American Family Life Assurance Company of Columbus, provides supplemental health and life insurance products. It operates through two segments, Aflac Japan and Aflac U.S. The stock currently has a dividend yield of 2.4%. AFL has a PE ratio of 9.7. Currently there are 6 analysts that rate Aflac a buy, no analysts rate it a sell, and 10 rate it a hold.

The average volume for Aflac has been 1.7 million shares per day over the past 30 days. Aflac has a market cap of $28.5 billion and is part of the financial sector and insurance industry. The stock has a beta of 1.61 and a short float of 0.9% with 3.06 days to cover. Shares are down 5.9% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Aflac as a buy. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, largely solid financial position with reasonable debt levels by most measures 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:
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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.
  • AFL, with its decline in revenue, underperformed when compared the industry average of 7.8%. Since the same quarter one year prior, revenues slightly dropped by 9.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Despite currently having a low debt-to-equity ratio of 0.31, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Insurance industry and the overall market, AFLAC INC's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
  • AFLAC INC's earnings per share declined by 15.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, AFLAC INC increased its bottom line by earning $6.75 versus $6.11 in the prior year. For the next year, the market is expecting a contraction of 7.5% in earnings ($6.24 versus $6.75).

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