Royal Gold (RGLD) Shows Signs Of Being Water-Logged And Getting Wetter

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 Royal Gold ( RGLD) 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 Royal Gold as such a stock due to the following factors:

  • RGLD has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $46.5 million.
  • RGLD has traded 897,366 shares today.
  • RGLD traded in a range 204.1% of the normal price range with a price range of $3.91.
  • RGLD traded below its daily resistance level (quality: 20 days, meaning that the stock is crossing a resistance level set by the last 20 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 RGLD:

Royal Gold, Inc., together with its subsidiaries, acquires and manages precious metals royalties, metal streams, and similar interests. It focuses on acquiring royalty interests or to finance projects that are in production or in development stage in exchange for royalty interests. The stock currently has a dividend yield of 1.1%. RGLD has a PE ratio of 82.8. Currently there are 7 analysts that rate Royal Gold a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Royal Gold has been 613,700 shares per day over the past 30 days. Royal has a market cap of $5.1 billion and is part of the basic materials sector and metals & mining industry. The stock has a beta of 0.40 and a short float of 5.5% with 4.61 days to cover. Shares are up 73% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Royal Gold as a buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, expanding profit margins, solid stock price performance, growth in earnings per share and increase in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:

  • RGLD's debt-to-equity ratio is very low at 0.13 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 27.73, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for ROYAL GOLD INC is currently very high, coming in at 93.66%. Regardless of RGLD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, RGLD's net profit margin of 34.87% significantly outperformed against the industry.
  • Powered by its strong earnings growth of 210.00% and other important driving factors, this stock has surged by 38.92% over the past year, outperforming the rise in the S&P 500 Index during the same period. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • ROYAL GOLD INC 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, ROYAL GOLD INC reported lower earnings of $1.09 versus $1.60 in the prior year. This year, the market expects an improvement in earnings ($1.65 versus $1.09).
  • RGLD, with its decline in revenue, underperformed when compared the industry average of 3.2%. Since the same quarter one year prior, revenues fell by 22.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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