Trade-Ideas: Analog Devices (ADI) 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 Analog Devices ( ADI) 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 Analog Devices as such a stock due to the following factors:

  • ADI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $89.1 million.
  • ADI has traded 606,627 shares today.
  • ADI is trading at 2.80 times the normal volume for the stock at this time of day.
  • ADI 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 ADI:

Analog Devices, Inc. is engaged in the design, manufacture, and marketing of analog, mixed-signal, and digital signal processing integrated circuits (ICs) for use in industrial, automotive, consumer, and communication markets worldwide. The stock currently has a dividend yield of 2.9%. ADI has a PE ratio of 22.4. Currently there are 10 analysts that rate Analog Devices a buy, no analysts rate it a sell, and 11 rate it a hold.

The average volume for Analog Devices has been 1.9 million shares per day over the past 30 days. Analog Devices has a market cap of $15.9 billion and is part of the technology sector and electronics industry. The stock has a beta of 1.17 and a short float of 1.6% with 3.12 days to cover. Shares are down 0.8% year-to-date as of the close of trading on Thursday.

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 Analog Devices as a buy. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • ANALOG DEVICES has improved earnings per share by 13.5% in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. We anticipate these figures will begin to experience more growth in the coming year. During the past fiscal year, ANALOG DEVICES increased its bottom line by earning $2.14 versus $2.13 in the prior year. This year, the market expects an improvement in earnings ($2.36 versus $2.14).
  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.9%. Since the same quarter one year prior, revenues slightly increased by 5.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • ADI's debt-to-equity ratio is very low at 0.18 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 9.05, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for ANALOG DEVICES is currently very high, coming in at 70.01%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 26.98% is above that of the industry average.
  • 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 Semiconductors & Semiconductor Equipment industry and the overall market on the basis of return on equity, ANALOG DEVICES has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.

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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