Vulcan Materials (VMC) Is 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 Vulcan Materials ( VMC) 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 Vulcan Materials as such a stock due to the following factors:

  • VMC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $64.5 million.
  • VMC has traded 340,336 shares today.
  • VMC is trading at 1.75 times the normal volume for the stock at this time of day.
  • VMC 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 VMC:

Vulcan Materials Company produces and sells construction aggregates, asphalt mix, ready-mixed concrete, and cement primarily in the United States. The company's Aggregates segment offers crushed stone, sand and gravel, sand, and other aggregates, as well as related products and services. The stock currently has a dividend yield of 0.4%. VMC has a PE ratio of 53.7. Currently there are 3 analysts that rate Vulcan Materials a buy, 2 analysts rate it a sell, and 5 rate it a hold.

The average volume for Vulcan Materials has been 778,700 shares per day over the past 30 days. Vulcan has a market cap of $8.1 billion and is part of the industrial goods sector and materials & construction industry. The stock has a beta of 1.43 and a short float of 3.2% with 3.80 days to cover. Shares are up 5% year-to-date as of the close of trading on Wednesday.

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 Vulcan Materials 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, compelling growth in net income and solid stock price performance. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • VMC's revenue growth has slightly outpaced the industry average of 4.2%. Since the same quarter one year prior, revenues slightly increased by 7.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.49, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, VMC has a quick ratio of 2.07, which demonstrates the ability of the company to cover short-term liquidity needs.
  • VULCAN MATERIALS CO 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, VULCAN MATERIALS CO turned its bottom line around by earning $0.16 versus -$0.42 in the prior year. This year, the market expects an improvement in earnings ($0.87 versus $0.16).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Construction Materials industry. The net income increased by 59.8% when compared to the same quarter one year prior, rising from $28.77 million to $45.97 million.
  • Powered by its strong earnings growth of 52.17% and other important driving factors, this stock has surged by 25.93% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

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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