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 NRG Energy ( NRG) 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 NRG Energy as such a stock due to the following factors:

  • NRG has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $83.2 million.
  • NRG has traded 2.1 million shares today.
  • NRG traded in a range 211% of the normal price range with a price range of $1.73.
  • NRG traded below its daily resistance level (quality: 28 days, meaning that the stock is crossing a resistance level set by the last 28 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 NRG:

NRG Energy, Inc., together with its subsidiaries, operates as a power and energy company. The company is engaged in the ownership and operation of power generation facilities. The stock currently has a dividend yield of 2.3%. Currently there are 7 analysts that rate NRG Energy a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for NRG Energy has been 4.4 million shares per day over the past 30 days. NRG Energy has a market cap of $8.6 billion and is part of the utilities sector and utilities industry. The stock has a beta of 1.11 and a short float of 3.6% with 2.83 days to cover. Shares are down 8.1% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates NRG Energy as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in net income and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 0.8%. Since the same quarter one year prior, revenues rose by 30.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Independent Power Producers & Energy Traders industry. The net income increased by 41.2% when compared to the same quarter one year prior, rising from $119.00 million to $168.00 million.
  • NRG ENERGY INC has improved earnings per share by 33.3% in the most recent quarter compared to the same quarter a year ago. 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, NRG ENERGY INC swung to a loss, reporting -$1.27 versus $2.21 in the prior year. This year, the market expects an improvement in earnings ($1.99 versus -$1.27).
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Independent Power Producers & Energy Traders industry and the overall market on the basis of return on equity, NRG ENERGY INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • The gross profit margin for NRG ENERGY INC is rather low; currently it is at 22.13%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.67% trails that of 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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