Wisconsin Energy (WEC) Is Today's Roof Leaker Stock

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 Wisconsin Energy ( WEC) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Wisconsin Energy as such a stock due to the following factors:

  • WEC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $71.4 million.
  • WEC has traded 186,612 shares today.
  • WEC is trading at 2.17 times the normal volume for the stock at this time of day.
  • WEC crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

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More details on WEC:

Wisconsin Energy Corporation, through its subsidiaries, generates and distributes electric energy. The company operates in two segments, Utility Energy and Non-Utility Energy. It generates electricity from coal, natural gas, oil, hydroelectric, wind, and biomass. The stock currently has a dividend yield of 3.4%. WEC has a PE ratio of 19.1. Currently there are no analysts that rate Wisconsin Energy a buy, 1 analyst rates it a sell, and 9 rate it a hold.

The average volume for Wisconsin Energy has been 1.7 million shares per day over the past 30 days. Wisconsin Energy has a market cap of $11.2 billion and is part of the utilities sector and utilities industry. The stock has a beta of 0.18 and a short float of 3.8% with 5.73 days to cover. Shares are down 6% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Wisconsin Energy as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • WEC's revenue growth has slightly outpaced the industry average of 5.0%. Since the same quarter one year prior, revenues slightly increased by 4.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • WISCONSIN ENERGY CORP's earnings per share declined by 15.9% 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, WISCONSIN ENERGY CORP increased its bottom line by earning $2.58 versus $2.51 in the prior year. This year, the market expects an improvement in earnings ($2.72 versus $2.58).
  • In its most recent trading session, WEC has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The gross profit margin for WISCONSIN ENERGY CORP is currently lower than what is desirable, coming in at 28.22%. Regardless of WEC's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 9.90% trails the industry average.

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