Verizon Communications (VZ) 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 Verizon Communications ( VZ) 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 Verizon Communications as such a stock due to the following factors:

  • VZ has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $531.8 million.
  • VZ has traded 4.8 million shares today.
  • VZ is trading at 1.54 times the normal volume for the stock at this time of day.
  • VZ 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 VZ:

Verizon Communications Inc. provides communications, information, and entertainment products and services to consumers, businesses, and governmental agencies worldwide. The stock currently has a dividend yield of 4.5%. VZ has a PE ratio of 10.4. Currently there are 22 analysts that rate Verizon Communications a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Verizon Communications has been 13.0 million shares per day over the past 30 days. Verizon has a market cap of $202.1 billion and is part of the technology sector and telecommunications industry. The stock has a beta of 0.01 and a short float of 0.9% with 3.86 days to cover. Shares are down 0.3% year-to-date as of the close of trading on Thursday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Verizon Communications as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, compelling growth in net income, increase in stock price during the past year 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:
  • VZ's revenue growth has slightly outpaced the industry average of 1.4%. Since the same quarter one year prior, revenues slightly increased by 5.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Diversified Telecommunication Services industry and the overall market, VERIZON COMMUNICATIONS INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • 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 87.6% when compared to the same quarter one year prior, rising from $2,246.00 million to $4,214.00 million.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • The gross profit margin for VERIZON COMMUNICATIONS INC is rather high; currently it is at 61.61%. Regardless of VZ's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, VZ's net profit margin of 13.38% compares favorably to 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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