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 Wabco Holdings ( WBC) 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 Wabco Holdings as such a stock due to the following factors:

  • WBC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $70.6 million.
  • WBC has traded 1.5 million shares today.
  • WBC traded in a range 233.2% of the normal price range with a price range of $5.63.
  • WBC traded below its daily resistance level (quality: 6 days, meaning that the stock is crossing a resistance level set by the last 6 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 WBC:

WABCO Holdings Inc., together with its subsidiaries, provides electronic, mechanical, and mechatronic products for commercial truck, trailer, bus, and passenger car manufacturers worldwide. WBC has a PE ratio of 27.2. Currently there are 7 analysts that rate Wabco Holdings a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Wabco Holdings has been 557,900 shares per day over the past 30 days. Wabco has a market cap of $7.7 billion and is part of the consumer goods sector and automotive industry. Shares are up 27.1% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Wabco Holdings as a buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, notable return on equity and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • The current debt-to-equity ratio, 0.37, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, WBC has a quick ratio of 2.19, which demonstrates the ability of the company to cover short-term liquidity needs.
  • WABCO HOLDINGS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, WABCO HOLDINGS INC reported lower earnings of $4.82 versus $10.37 in the prior year. This year, the market expects an improvement in earnings ($6.11 versus $4.82).
  • WBC, with its decline in revenue, slightly underperformed the industry average of 1.3%. Since the same quarter one year prior, revenues slightly dropped by 5.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Machinery industry and the overall market, WABCO HOLDINGS INC's return on equity significantly exceeds that of both the industry average and the S&P 500.

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