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 ON Semiconductor ( ONNN) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified ON Semiconductor as such a stock due to the following factors:

  • ONNN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $67.6 million.
  • ONNN has traded 1.3 million shares today.
  • ONNN is trading at 1.81 times the normal volume for the stock at this time of day.
  • ONNN crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

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More details on ONNN:

ON Semiconductor Corporation designs, manufactures, and markets semiconductor components for electronic systems and products worldwide. It operates in three segments: Application Products Group, Standard Products Group, and System Solutions Group. ONNN has a PE ratio of 22.2. Currently there are 12 analysts that rate ON Semiconductor a buy, 1 analyst rates it a sell, and 1 rates it a hold.

The average volume for ON Semiconductor has been 6.9 million shares per day over the past 30 days. ON Semiconductor has a market cap of $4.0 billion and is part of the technology sector and electronics industry. The stock has a beta of 1.37 and a short float of 1.2% with 0.63 days to cover. Shares are up 5.1% year-to-date as of the close of trading on Friday.

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 ON Semiconductor as a buy. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, impressive record of earnings per share growth, compelling growth in net income, revenue growth and reasonable valuation levels. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

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.
  • ON SEMICONDUCTOR 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, ON SEMICONDUCTOR CORP turned its bottom line around by earning $0.33 versus -$0.20 in the prior year. This year, the market expects an improvement in earnings ($0.80 versus $0.33).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 158.4% when compared to the same quarter one year prior, rising from $22.60 million to $58.40 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.4%. Since the same quarter one year prior, revenues slightly increased by 6.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.

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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