Trade-Ideas: Rockwell Collins (COL) 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 Rockwell Collins ( COL) 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 Rockwell Collins as such a stock due to the following factors:

  • COL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $61.5 million.
  • COL has traded 586,343 shares today.
  • COL is trading at 1.80 times the normal volume for the stock at this time of day.
  • COL 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 COL:

Rockwell Collins, Inc. designs, produces, and supports communications and aviation electronics for commercial and military customers worldwide. It operates in two segments, Government Systems and Commercial Systems. The stock currently has a dividend yield of 1.6%. COL has a PE ratio of 16.6. Currently there are 8 analysts that rate Rockwell Collins a buy, 1 analyst rates it a sell, and 7 rate it a hold.

The average volume for Rockwell Collins has been 672,100 shares per day over the past 30 days. Rockwell Collins has a market cap of $10.2 billion and is part of the industrial goods sector and aerospace/defense industry. The stock has a beta of 0.66 and a short float of 5.1% with 8.09 days to cover. Shares are up 2.5% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Rockwell Collins as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, expanding profit margins, growth in earnings per share and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 1.3%. Since the same quarter one year prior, revenues rose by 11.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Net operating cash flow has increased to $174.00 million or 33.84% when compared to the same quarter last year. In addition, ROCKWELL COLLINS INC has also vastly surpassed the industry average cash flow growth rate of -19.74%.
  • 39.40% is the gross profit margin for ROCKWELL COLLINS INC which we consider to be strong. Regardless of COL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, COL's net profit margin of 12.50% compares favorably to the industry average.
  • ROCKWELL COLLINS INC reported flat earnings per share in the most recent quarter. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, ROCKWELL COLLINS INC increased its bottom line by earning $4.57 versus $4.15 in the prior year. For the next year, the market is expecting a contraction of 1.5% in earnings ($4.50 versus $4.57).
  • In its most recent trading session, COL 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 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.

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