Valspar (VAL) Is Today's Water-Logged And Getting Wetter Stock

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 Valspar ( VAL) 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 Valspar as such a stock due to the following factors:

  • VAL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $36.6 million.
  • VAL has traded 341,797 shares today.
  • VAL traded in a range 405.4% of the normal price range with a price range of $4.14.
  • VAL traded below its daily resistance level (quality: 18 days, meaning that the stock is crossing a resistance level set by the last 18 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 VAL:

The Valspar Corporation manufactures and distributes various coatings, paints, and related products worldwide. The company operates in two segments, Coatings and Paints. The stock currently has a dividend yield of 1.2%. VAL has a PE ratio of 24.6. Currently there are 6 analysts that rate Valspar a buy, 1 analyst rates it a sell, and 4 rate it a hold.

The average volume for Valspar has been 417,500 shares per day over the past 30 days. Valspar has a market cap of $7.0 billion and is part of the basic materials sector and chemicals industry. The stock has a beta of 1.35 and a short float of 1.7% with 3.36 days to cover. Shares are up 19.1% year-to-date as of the close of trading on Monday.

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 Valspar as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, solid stock price performance, growth in earnings per share 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:
  • VAL's revenue growth has slightly outpaced the industry average of 9.8%. Since the same quarter one year prior, revenues rose by 10.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. 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.
  • VALSPAR CORP has improved earnings per share by 9.6% 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, VALSPAR CORP increased its bottom line by earning $3.20 versus $3.09 in the prior year. This year, the market expects an improvement in earnings ($4.12 versus $3.20).
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Chemicals industry and the overall market, VALSPAR CORP's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • 36.71% is the gross profit margin for VALSPAR CORP which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 8.13% trails 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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