NCI Building Systems (NCS): Today's Weak On High Volume Stock

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 NCI Building Systems ( NCS) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified NCI Building Systems as such a stock due to the following factors:

  • NCS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $9.2 million.
  • NCS has traded 66,901 shares today.
  • NCS is trading at 8.82 times the normal volume for the stock at this time of day.
  • NCS is trading at a new low 4.16% below yesterday's close.

'Weak on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as material stock news, analyst downgrades, insider selling, selling from 'superinvestors,' or that hedge funds and traders are piling out of a stock ahead of a catalyst. 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 (or avoid losses by trimming weak positions). 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 NCS:

NCI Building Systems, Inc. manufactures and markets metal products for the nonresidential construction industry in North America. Currently there are 3 analysts that rate NCI Building Systems a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for NCI Building Systems has been 301,300 shares per day over the past 30 days. NCI Building Systems has a market cap of $1.5 billion and is part of the industrial goods sector and materials & construction industry. The stock has a beta of 1.75 and a short float of 8.2% with 6.42 days to cover. Shares are up 20.5% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates NCI Building Systems as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we find that the company's profit margins have been poor overall.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 2.6%. Since the same quarter one year prior, revenues rose by 14.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • NCI BUILDING SYSTEMS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, NCI BUILDING SYSTEMS INC continued to lose money by earning -$0.55 versus -$4.06 in the prior year. This year, the market expects an improvement in earnings ($0.22 versus -$0.55).
  • Even though the current debt-to-equity ratio is 1.01, it is still below the industry average, suggesting that this level of debt is acceptable within the Building Products industry. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.73 is weak.
  • Powered by its strong earnings growth of 142.10% and other important driving factors, this stock has surged by 70.97% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, however, we cannot assume that the stock's past performance is going to drive future results. Quite to the contrary, its sharp appreciation over the last year is one of the factors that should prompt investors to seek better opportunities elsewhere.
  • The gross profit margin for NCI BUILDING SYSTEMS INC is rather low; currently it is at 24.49%. Regardless of NCS's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.68% trails the industry average.

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