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.

Trade-Ideas LLC identified Herbalife ( HLF) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Herbalife as such a stock due to the following factors:

  • HLF has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $159.5 million.
  • HLF has traded 6.2 million shares today.
  • HLF is trading at 7.80 times the normal volume for the stock at this time of day.
  • HLF crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. 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 on. 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 HLF:

Herbalife Ltd., a nutrition company, develops and sells weight management, healthy meals and snacks, sports and fitness, energy and targeted nutritional products, and personal care products. HLF has a PE ratio of 11.2. Currently there are 2 analysts that rate Herbalife a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Herbalife has been 2.3 million shares per day over the past 30 days. Herbalife has a market cap of $3.5 billion and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 3.30 and a short float of 67.5% with 9.36 days to cover. Shares are up 11.7% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Herbalife as a hold. The company's strengths can be seen in multiple areas, such as its expanding profit margins and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • The gross profit margin for HERBALIFE LTD is rather high; currently it is at 53.23%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 9.11% trails the industry average.
  • HERBALIFE LTD has improved earnings per share by 5.2% 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, HERBALIFE LTD reported lower earnings of $3.39 versus $4.91 in the prior year. This year, the market expects an improvement in earnings ($4.28 versus $3.39).
  • HLF, with its decline in revenue, underperformed when compared the industry average of 8.0%. Since the same quarter one year prior, revenues fell by 10.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Personal Products industry. The net income has decreased by 16.4% when compared to the same quarter one year ago, dropping from $123.54 million to $103.29 million.
  • Net operating cash flow has significantly decreased to $61.90 million or 68.39% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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