Goldcorp (GG) Showing Signs Of Being A Roof Leaker

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 Goldcorp ( GG) 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 Goldcorp as such a stock due to the following factors:

  • GG has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $102.8 million.
  • GG has traded 534,645 shares today.
  • GG is trading at 1.90 times the normal volume for the stock at this time of day.
  • GG 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 GG:

Goldcorp Inc. is engaged in the acquisition, exploration, development, and operation of precious metal properties in Canada, the United States, Mexico, and Central and South America. The stock currently has a dividend yield of 2.3%. Currently there are 10 analysts that rate Goldcorp a buy, 1 analyst rates it a sell, and 5 rate it a hold.

The average volume for Goldcorp has been 4.4 million shares per day over the past 30 days. Goldcorp has a market cap of $21.1 billion and is part of the basic materials sector and metals & mining industry. Shares are up 19% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Goldcorp as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • GG's revenue growth has slightly outpaced the industry average of 0.6%. Since the same quarter one year prior, revenues slightly increased by 5.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 44.15% is the gross profit margin for GOLDCORP INC which we consider to be strong. It has increased significantly from the same period last year. Along with this, the net profit margin of 19.97% is above that of the industry average.
  • GG's debt-to-equity ratio is very low at 0.17 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.91 is somewhat weak and could be cause for future problems.
  • GG has underperformed the S&P 500 Index, declining 13.59% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, GOLDCORP INC underperformed against that of the industry average and is significantly less than 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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