Flowserve (FLS) Falls Further As It's Water-Logged And Getting Wetter

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 Flowserve ( FLS) 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 Flowserve as such a stock due to the following factors:

  • FLS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $74.3 million.
  • FLS has traded 1.9 million shares today.
  • FLS traded in a range 208.9% of the normal price range with a price range of $2.99.
  • FLS traded below its daily resistance level (quality: 48 days, meaning that the stock is crossing a resistance level set by the last 48 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 FLS:

Flowserve Corporation designs, manufactures, distributes, and services industrial flow management equipment worldwide. The company operates through three segments: Engineered Product Division (EPD), Industrial Product Division (IPD), and Flow Control Division (FCD). The stock currently has a dividend yield of 1.2%. FLS has a PE ratio of 15.7. Currently there are 9 analysts that rate Flowserve a buy, 1 analyst rates it a sell, and 8 rate it a hold.

The average volume for Flowserve has been 1.5 million shares per day over the past 30 days. Flowserve has a market cap of $7.9 billion and is part of the industrial goods sector and industrial industry. The stock has a beta of 1.72 and a short float of 4.7% with 4.79 days to cover. Shares are down 1.6% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Flowserve as a buy. The company's strengths can be seen in multiple areas, such as its increase in net income, largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and good cash flow from operations. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Machinery industry average. The net income increased by 12.7% when compared to the same quarter one year prior, going from $141.08 million to $159.02 million.
  • The current debt-to-equity ratio, 0.60, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.04, which illustrates the ability to avoid short-term cash problems.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Machinery industry and the overall market, FLOWSERVE CORP's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • 36.90% is the gross profit margin for FLOWSERVE CORP which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 11.51% is above that of the industry average.
  • Net operating cash flow has increased to $444.76 million or 17.39% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -20.85%.

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