Water-Logged And Getting Wetter Stock Of The Day: Springleaf Holdings (LEAF)

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 Springleaf Holdings ( LEAF) 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 Springleaf Holdings as such a stock due to the following factors:

  • LEAF has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $96.2 million.
  • LEAF has traded 1.8 million shares today.
  • LEAF traded in a range 207% of the normal price range with a price range of $2.65.
  • LEAF traded below its daily resistance level (quality: 50 days, meaning that the stock is crossing a resistance level set by the last 50 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 LEAF:

Springleaf Holdings, Inc., through its subsidiaries, offers consumer finance and credit insurance products and services. It provides personal loans secured by consumer household goods, and other personal property; and unsecured loans. LEAF has a PE ratio of 11.6. Currently there are 2 analysts that rate Springleaf Holdings a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Springleaf Holdings has been 672,400 shares per day over the past 30 days. Springleaf has a market cap of $5.9 billion and is part of the financial sector and financial services industry. Shares are up 40.9% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Springleaf Holdings as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, generally high debt management risk, weak operating cash flow and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • 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 Consumer Finance industry. The net income has significantly decreased by 275.2% when compared to the same quarter one year ago, falling from $26.73 million to -$46.83 million.
  • The debt-to-equity ratio is very high at 4.14 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
  • Net operating cash flow has significantly decreased to $64.82 million or 73.90% when compared to the same quarter last year. Despite a decrease in cash flow SPRINGLEAF HOLDINGS INC is still fairing well by exceeding its industry average cash flow growth rate of -98.64%.
  • SPRINGLEAF 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. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, SPRINGLEAF HOLDINGS INC turned its bottom line around by earning $4.37 versus -$0.18 in the prior year. For the next year, the market is expecting a contraction of 46.2% in earnings ($2.35 versus $4.37).
  • LEAF, with its decline in revenue, underperformed when compared the industry average of 8.8%. Since the same quarter one year prior, revenues fell by 27.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

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