Southern (SO) Marked As Today's Roof Leaker Stock

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 Southern ( SO) 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 Southern as such a stock due to the following factors:

  • SO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $205.9 million.
  • SO has traded 2.9 million shares today.
  • SO is trading at 1.84 times the normal volume for the stock at this time of day.
  • SO 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 SO:

The Southern Company, together with its subsidiaries, operates as a public electric utility company. The stock currently has a dividend yield of 4.8%. SO has a PE ratio of 17.2. Currently there are 2 analysts that rate Southern a buy, 2 analysts rate it a sell, and 10 rate it a hold.

The average volume for Southern has been 4.4 million shares per day over the past 30 days. Southern has a market cap of $38.6 billion and is part of the utilities sector and utilities industry. The stock has a beta of -0.01 and a short float of 4% with 8.27 days to cover. Shares are up 5.4% 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 Southern as a buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth, impressive record of earnings per share growth and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Electric Utilities industry. The net income increased by 100.6% when compared to the same quarter one year prior, rising from $313.00 million to $628.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 5.7%. Since the same quarter one year prior, revenues slightly increased by 5.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • SOUTHERN CO reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. 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, SOUTHERN CO reported lower earnings of $1.87 versus $2.67 in the prior year. This year, the market expects an improvement in earnings ($2.78 versus $1.87).
  • 35.97% is the gross profit margin for SOUTHERN CO which we consider to be strong. Regardless of SO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SO's net profit margin of 14.05% compares favorably to the industry average.
  • In its most recent trading session, SO 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. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it is one of the factors that makes this stock an attractive investment.

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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