Water-Logged And Getting Wetter: Frontier Communications (FTR)

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 Frontier Communications ( FTR) 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 Frontier Communications as such a stock due to the following factors:

  • FTR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $53.5 million.
  • FTR has traded 3.7 million shares today.
  • FTR traded in a range 224.8% of the normal price range with a price range of $0.26.
  • FTR traded below its daily resistance level (quality: 27 days, meaning that the stock is crossing a resistance level set by the last 27 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 FTR:

Frontier Communications Corporation, a communications company, provides regulated and unregulated voice, data, and video services to residential, business, and wholesale customers in the United States. The stock currently has a dividend yield of 5.9%. FTR has a PE ratio of 37.9. Currently there are 2 analysts that rate Frontier Communications a buy, 3 analysts rate it a sell, and 5 rate it a hold.

The average volume for Frontier Communications has been 10.5 million shares per day over the past 30 days. Frontier has a market cap of $6.8 billion and is part of the technology sector and telecommunications industry. The stock has a beta of 0.74 and a short float of 16.3% with 17.91 days to cover. Shares are up 44.7% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Frontier Communications as a buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, good cash flow from operations, solid stock price performance, impressive record of earnings per share growth and expanding profit margins. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Diversified Telecommunication Services industry. The net income increased by 198.0% when compared to the same quarter one year prior, rising from -$38.46 million to $37.68 million.
  • Net operating cash flow has slightly increased to $328.26 million or 2.12% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -21.96%.
  • Powered by its strong earnings growth of 200.00% and other important driving factors, this stock has surged by 49.21% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • FRONTIER COMMUNICATIONS CORP 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, FRONTIER COMMUNICATIONS CORP reported lower earnings of $0.12 versus $0.14 in the prior year. This year, the market expects an improvement in earnings ($0.21 versus $0.12).
  • 45.12% is the gross profit margin for FRONTIER COMMUNICATIONS CORP which we consider to be strong. Regardless of FTR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 3.28% trails the industry average.

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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