Fossil Group (FOSL) Shows Signs Of Being 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 Fossil Group ( FOSL) 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 Fossil Group as such a stock due to the following factors:

  • FOSL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $75.0 million.
  • FOSL has traded 1.7 million shares today.
  • FOSL traded in a range 227.4% of the normal price range with a price range of $4.18.
  • FOSL traded below its daily resistance level (quality: 53 days, meaning that the stock is crossing a resistance level set by the last 53 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 FOSL:

Fossil Group, Inc., together with its subsidiaries, designs, develops, markets, and distributes consumer fashion accessories. The company operates through four segments: North America Wholesale, Europe Wholesale, Asia Pacific Wholesale, and Direct to Consumer. FOSL has a PE ratio of 12.0. Currently there are 4 analysts that rate Fossil Group a buy, 4 analysts rate it a sell, and 4 rate it a hold.

The average volume for Fossil Group has been 1.2 million shares per day over the past 30 days. Fossil Group has a market cap of $4.2 billion and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 2.05 and a short float of 17.8% with 8.62 days to cover. Shares are down 22.8% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Fossil Group as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 10.0%. Since the same quarter one year prior, revenues slightly increased by 0.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 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. Compared to other companies in the Textiles, Apparel & Luxury Goods industry and the overall market, FOSSIL GROUP INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • FOSL's debt-to-equity ratio of 0.64 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that FOSL's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.62 is high and demonstrates strong liquidity.
  • FOSL has underperformed the S&P 500 Index, declining 21.26% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • Net operating cash flow has decreased to $189.97 million or 18.01% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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