Storm The Castle: L-3 Communications Holdings (LLL)

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 L-3 Communications Holdings ( LLL) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified L-3 Communications Holdings as such a stock due to the following factors:

  • LLL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $91.4 million.
  • LLL has traded 728,483 shares today.
  • LLL is trading at 1.70 times the normal volume for the stock at this time of day.
  • LLL crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on LLL:

L-3 Communications Holdings, Inc. provides command, control, communications, intelligence, surveillance, and reconnaissance (C3ISR) systems; aircraft modernization and maintenance; and government services in the United States and internationally. The stock currently has a dividend yield of 2.2%. LLL has a PE ratio of 13.6. Currently there are 5 analysts that rate L-3 Communications Holdings a buy, 1 analyst rates it a sell, and 6 rate it a hold.

The average volume for L-3 Communications Holdings has been 834,200 shares per day over the past 30 days. L-3 has a market cap of $9.6 billion and is part of the industrial goods sector and aerospace/defense industry. The stock has a beta of 0.94 and a short float of 1.6% with 1.98 days to cover. Shares are up 2.7% 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 L-3 Communications Holdings as a buy. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • Net operating cash flow has increased to $277.00 million or 10.80% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -19.45%.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. 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.
  • LLL, with its decline in revenue, slightly underperformed the industry average of 1.3%. Since the same quarter one year prior, revenues slightly dropped by 5.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • L-3 COMMUNICATIONS HLDGS INC's earnings per share declined by 13.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, L-3 COMMUNICATIONS HLDGS INC increased its bottom line by earning $8.54 versus $8.03 in the prior year. For the next year, the market is expecting a contraction of 6.3% in earnings ($8.00 versus $8.54).

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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