Water-Logged And Getting Wetter Stock Of The Day: Mohawk Industries (MHK)

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 Mohawk Industries ( MHK) 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 Mohawk Industries as such a stock due to the following factors:

  • MHK has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $95.2 million.
  • MHK has traded 844,379 shares today.
  • MHK traded in a range 240% of the normal price range with a price range of $7.11.
  • MHK traded below its daily resistance level (quality: 26 days, meaning that the stock is crossing a resistance level set by the last 26 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 MHK:

Mohawk Industries, Inc., together with its subsidiaries, designs, manufactures, sources, distributes, and markets floor covering products for residential and commercial applications in both remodeling and new construction worldwide. MHK has a PE ratio of 23.2. Currently there are 7 analysts that rate Mohawk Industries a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Mohawk Industries has been 735,200 shares per day over the past 30 days. Mohawk has a market cap of $11.4 billion and is part of the consumer goods sector and consumer durables industry. The stock has a beta of 1.06 and a short float of 2.6% with 2.39 days to cover. Shares are up 3.3% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Mohawk Industries as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, compelling growth in net income, good cash flow from operations and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 10.4%. Since the same quarter one year prior, revenues slightly increased by 1.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • MOHAWK INDUSTRIES INC has improved earnings per share by 25.6% 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, MOHAWK INDUSTRIES INC increased its bottom line by earning $5.05 versus $3.60 in the prior year. This year, the market expects an improvement in earnings ($8.11 versus $5.05).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Household Durables industry. The net income increased by 27.0% when compared to the same quarter one year prior, rising from $119.07 million to $151.27 million.
  • Net operating cash flow has slightly increased to $225.55 million or 5.86% when compared to the same quarter last year. In addition, MOHAWK INDUSTRIES INC has also vastly surpassed the industry average cash flow growth rate of -67.95%.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Looking ahead, the stock's 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 the other strengths this company displays justify these higher price levels.

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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