Canadian National Railway (CNI) Showing Signs Of Being Water-Logged And Getting Wetter

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 Canadian National Railway ( CNI) 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 Canadian National Railway as such a stock due to the following factors:

  • CNI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $62.7 million.
  • CNI has traded 590,902 shares today.
  • CNI traded in a range 229.3% of the normal price range with a price range of $2.17.
  • CNI traded below its daily resistance level (quality: 4 days, meaning that the stock is crossing a resistance level set by the last 4 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 CNI:

Canadian National Railway Company, together with its subsidiaries, engages in rail and related transportation business in North America. The stock currently has a dividend yield of 1.2%. CNI has a PE ratio of 23.7. Currently there are 6 analysts that rate Canadian National Railway a buy, no analysts rate it a sell, and 8 rate it a hold.

The average volume for Canadian National Railway has been 829,900 shares per day over the past 30 days. Canadian National Railway has a market cap of $61.3 billion and is part of the services sector and transportation industry. Shares are up 30.3% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Canadian National Railway as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, growth in earnings per share, increase in net income and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the ratings report include:
  • CNI's revenue growth has slightly outpaced the industry average of 8.9%. Since the same quarter one year prior, revenues rose by 16.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 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 47.07% 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, CNI should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • CANADIAN NATIONAL RAILWAY CO has improved earnings per share by 21.9% 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. During the past fiscal year, CANADIAN NATIONAL RAILWAY CO increased its bottom line by earning $3.09 versus $3.06 in the prior year. This year, the market expects an improvement in earnings ($3.65 versus $3.09).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Road & Rail industry average. The net income increased by 18.1% when compared to the same quarter one year prior, going from $717.00 million to $847.00 million.
  • 48.62% is the gross profit margin for CANADIAN NATIONAL RAILWAY CO which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 27.18% is above that of the industry average.

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