Water-Logged And Getting Wetter: Copa Holdings (CPA)

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 Copa Holdings ( CPA) 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 Copa Holdings as such a stock due to the following factors:

  • CPA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $38.6 million.
  • CPA has traded 89,479 shares today.
  • CPA traded in a range 269.4% of the normal price range with a price range of $5.89.
  • CPA traded below its daily resistance level (quality: 147 days, meaning that the stock is crossing a resistance level set by the last 147 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 CPA:

Copa Holdings, S.A. provides airline passenger and cargo services in Latin America. It provides services within Colombia; and international flights from various cities in Colombia to Panama, Venezuela, Ecuador, Mexico, Cuba, Guatemala, and Costa Rica. The stock currently has a dividend yield of 2.5%. CPA has a PE ratio of 15.3. Currently there are 6 analysts that rate Copa Holdings a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Copa Holdings has been 291,700 shares per day over the past 30 days. Copa has a market cap of $5.0 billion and is part of the services sector and transportation industry. The stock has a beta of 1.05 and a short float of 0.5% with 1.02 days to cover. Shares are down 5.5% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Copa Holdings as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, increase in stock price during the past year and notable return on equity. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the ratings report include:

  • The revenue growth significantly trails the industry average of 49.0%. Since the same quarter one year prior, revenues rose by 11.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.52, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.33, which illustrates the ability to avoid short-term cash problems.
  • COPA HOLDINGS SA has improved earnings per share by 33.2% 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, COPA HOLDINGS SA increased its bottom line by earning $9.63 versus $7.35 in the prior year. This year, the market expects an improvement in earnings ($11.48 versus $9.63).
  • 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.
  • 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 Airlines industry and the overall market on the basis of return on equity, COPA HOLDINGS SA has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.

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