Sanderson Farms (SAFM) Is Water-Logged And Getting Wetter Today

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 Sanderson Farms ( SAFM) 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 Sanderson Farms as such a stock due to the following factors:

  • SAFM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $47.6 million.
  • SAFM has traded 244,269 shares today.
  • SAFM traded in a range 227.4% of the normal price range with a price range of $7.18.
  • SAFM traded below its daily resistance level (quality: 35 days, meaning that the stock is crossing a resistance level set by the last 35 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 SAFM:

Sanderson Farms, Inc., an integrated poultry processing company, produces, processes, markets, and distributes fresh, frozen, and prepared chicken products in the United States. The stock currently has a dividend yield of 1%. SAFM has a PE ratio of 9.9. Currently there are no analysts that rate Sanderson Farms a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for Sanderson Farms has been 629,300 shares per day over the past 30 days. Sanderson Farms has a market cap of $2.0 billion and is part of the consumer goods sector and food & beverage industry. The stock has a beta of 0.37 and a short float of 43.1% with 13.34 days to cover. Shares are up 19.6% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Sanderson Farms 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, notable return on equity, attractive valuation levels and solid stock price performance. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • SAFM's revenue growth has slightly outpaced the industry average of 2.0%. Since the same quarter one year prior, revenues slightly increased by 4.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • SAFM's debt-to-equity ratio is very low at 0.02 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.42, which illustrates the ability to avoid short-term cash problems.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Food Products industry and the overall market, SANDERSON FARMS INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 33.95% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, SAFM should continue to move higher despite the fact that it has already enjoyed a very nice gain 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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