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 Canadian Pacific Railway ( CP) 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 Canadian Pacific Railway as such a stock due to the following factors:

  • CP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $115.8 million.
  • CP has traded 832,722 shares today.
  • CP is trading at 2.40 times the normal volume for the stock at this time of day.
  • CP 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 CP:

Canadian Pacific Railway Limited, through its subsidiaries, operates a transcontinental railway in Canada and the United States. The company provides logistics and supply chain expertise services. The stock currently has a dividend yield of 0.6%. CP has a PE ratio of 25.9. Currently there are 10 analysts that rate Canadian Pacific Railway a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Canadian Pacific Railway has been 820,900 shares per day over the past 30 days. Canadian Pacific Railway has a market cap of $30.9 billion and is part of the services sector and transportation industry. Shares are down 1.4% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Canadian Pacific Railway as a buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, revenue growth, notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.

Highlights from the ratings report include:
  • CANADIAN PACIFIC RAILWAY LTD reported significant earnings per share improvement 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, CANADIAN PACIFIC RAILWAY LTD increased its bottom line by earning $8.49 versus $4.98 in the prior year. This year, the market expects an improvement in earnings ($10.98 versus $8.49).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Road & Rail industry. The net income increased by 450.0% when compared to the same quarter one year prior, rising from $82.00 million to $451.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 13.6%. Since the same quarter one year prior, revenues slightly increased by 9.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. When compared to other companies in the Road & Rail industry and the overall market, CANADIAN PACIFIC RAILWAY LTD's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • 48.13% is the gross profit margin for CANADIAN PACIFIC RAILWAY LTD which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 25.62% is above that of the industry average.

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