Weak On High Volume: Esterline Technologies (ESL)

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 Esterline Technologies ( ESL) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Esterline Technologies as such a stock due to the following factors:

  • ESL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $18.4 million.
  • ESL has traded 72,279 shares today.
  • ESL is trading at 21.80 times the normal volume for the stock at this time of day.
  • ESL is trading at a new low 12.24% below yesterday's close.

'Weak on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as material stock news, analyst downgrades, insider selling, selling from 'superinvestors,' or that hedge funds and traders are piling out of a stock ahead of a catalyst. 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 (or avoid losses by trimming weak positions). 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 ESL:

Esterline Technologies Corporation designs, manufactures, and markets engineered products and systems primarily for aerospace and defense customers in the United States and internationally. ESL has a PE ratio of 22.4. Currently there are 5 analysts that rate Esterline Technologies a buy, 1 analyst rates it a sell, and 2 rate it a hold.

The average volume for Esterline Technologies has been 199,900 shares per day over the past 30 days. Esterline has a market cap of $3.8 billion and is part of the industrial goods sector and aerospace/defense industry. The stock has a beta of 1.23 and a short float of 5.6% with 9.14 days to cover. Shares are up 14.8% year-to-date as of the close of trading on Wednesday.

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 Esterline Technologies as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, expanding profit margins and increase in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 0.7%. Since the same quarter one year prior, revenues rose by 11.1%. 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.
  • The current debt-to-equity ratio, 0.32, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, ESL has a quick ratio of 1.52, which demonstrates the ability of the company to cover short-term liquidity needs.
  • ESTERLINE TECHNOLOGIES CORP' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ESTERLINE TECHNOLOGIES CORP increased its bottom line by earning $5.22 versus $3.59 in the prior year. This year, the market expects an improvement in earnings ($5.62 versus $5.22).
  • Compared to its closing price of one year ago, ESL's share price has jumped by 31.33%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • 40.03% is the gross profit margin for ESTERLINE TECHNOLOGIES CORP which we consider to be strong. Regardless of ESL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 7.32% 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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