Roof Leaker To Watch: Agrium (AGU)

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 Agrium ( AGU) 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 Agrium as such a stock due to the following factors:

  • AGU has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $57.6 million.
  • AGU has traded 88,602 shares today.
  • AGU is trading at 2.11 times the normal volume for the stock at this time of day.
  • AGU 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 AGU:

Agrium Inc. produces, retails, and distributes the crop nutrients, crop protection products, seeds, and agronomics primarily in North America, South America, Europe, and Australia. The company operates through two segments, Retail and Wholesale. The stock currently has a dividend yield of 3.2%. AGU has a PE ratio of 16.4. Currently there are 7 analysts that rate Agrium a buy, 2 analysts rate it a sell, and 11 rate it a hold.

The average volume for Agrium has been 578,700 shares per day over the past 30 days. Agrium has a market cap of $13.6 billion and is part of the basic materials sector and chemicals industry. Shares are up 2.3% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Agrium as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 7.6%. Since the same quarter one year prior, revenues slightly increased by 6.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has significantly increased by 117.54% to $10.00 million when compared to the same quarter last year. In addition, AGRIUM INC has also vastly surpassed the industry average cash flow growth rate of -14.08%.
  • The debt-to-equity ratio is somewhat low, currently at 0.60, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.74 is somewhat weak and could be cause for future problems.
  • In its most recent trading session, AGU has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen 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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