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 Franco-Nevada ( FNV) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Franco-Nevada as such a stock due to the following factors:

  • FNV has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $50.2 million.
  • FNV has traded 1.3 million shares today.
  • FNV is trading at 1.56 times the normal volume for the stock at this time of day.
  • FNV crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

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More details on FNV:

Franco-Nevada Corporation operates as a gold-focused royalty and stream company in the United States, Canada, Mexico, Australia, and Africa. The company also has interests in platinum group metal, oil and gas, and other resource properties. The stock currently has a dividend yield of 1.5%. FNV has a PE ratio of 318.2. Currently there is 1 analyst that rates Franco-Nevada a buy, 1 analyst rates it a sell, and 4 rate it a hold.

The average volume for Franco-Nevada has been 1.0 million shares per day over the past 30 days. Franco-Nevada has a market cap of $8.4 billion and is part of the basic materials sector and metals & mining industry. Shares are up 10.6% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Franco-Nevada as a hold. 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 and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:
  • FNV's revenue growth has slightly outpaced the industry average of 7.1%. Since the same quarter one year prior, revenues slightly increased by 8.9%. 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.
  • FNV has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 56.13, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for FRANCO-NEVADA CORP is currently very high, coming in at 82.16%. Regardless of FNV's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, FNV's net profit margin of 30.85% significantly outperformed against the industry.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, FRANCO-NEVADA CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.

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