Analog Devices (ADI) 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 Analog Devices ( ADI) 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 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 $77.5 million.
  • ADI has traded 721,419 shares today.
  • ADI traded in a range 232.4% of the normal price range with a price range of $1.72.
  • ADI traded below its daily resistance level (quality: 13 days, meaning that the stock is crossing a resistance level set by the last 13 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 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 23.0. 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 1.8 million shares per day over the past 30 days. Analog Devices has a market cap of $16.3 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 3.61 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 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 increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

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 9.1%. 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 stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. 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.

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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