Today's Roof Leaker Stock Is National Oilwell Varco (NOV)

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 National Oilwell Varco ( NOV) 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 National Oilwell Varco as such a stock due to the following factors:

  • NOV has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $267.7 million.
  • NOV has traded 643,026 shares today.
  • NOV is trading at 5.53 times the normal volume for the stock at this time of day.
  • NOV 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 NOV:

National Oilwell Varco, Inc. provides equipment and components for oil and gas drilling and production; oilfield services; and supply chain integration services to the upstream oil and gas industry worldwide. The stock currently has a dividend yield of 2.3%. NOV has a PE ratio of 13.7. Currently there are 9 analysts that rate National Oilwell Varco a buy, 1 analyst rates it a sell, and 8 rate it a hold.

The average volume for National Oilwell Varco has been 3.0 million shares per day over the past 30 days. National Oilwell Varco has a market cap of $34.7 billion and is part of the basic materials sector and energy industry. The stock has a beta of 2.18 and a short float of 3.2% with 3.63 days to cover. Shares are up 0.9% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates National Oilwell Varco as a buy. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and attractive valuation levels. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Energy Equipment & Services industry average. The net income increased by 16.6% when compared to the same quarter one year prior, going from $531.00 million to $619.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 19.1%. Since the same quarter one year prior, revenues rose by 12.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • NOV's debt-to-equity ratio is very low at 0.15 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.20, which illustrates the ability to avoid short-term cash problems.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 25.45% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, NOV should continue to move higher despite the fact that it has already enjoyed a very nice gain 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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