CenturyLink (CTL) Is Today's Water-Logged And Getting Wetter 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 CenturyLink ( CTL) 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 CenturyLink as such a stock due to the following factors:

  • CTL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $114.3 million.
  • CTL has traded 601,409 shares today.
  • CTL traded in a range 201.3% of the normal price range with a price range of $1.41.
  • CTL traded below its daily resistance level (quality: 18 days, meaning that the stock is crossing a resistance level set by the last 18 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 CTL:

CenturyLink, Inc. provides various communications services to residential, business, governmental, and wholesale customers in the United States. It operates through two segments, Business and Consumer. The stock currently has a dividend yield of 6%. CTL has a PE ratio of 26.5. Currently there are 6 analysts that rate CenturyLink a buy, 1 analyst rates it a sell, and 6 rate it a hold.

The average volume for CenturyLink has been 4.7 million shares per day over the past 30 days. CenturyLink has a market cap of $20.4 billion and is part of the technology sector and telecommunications industry. The stock has a beta of 0.71 and a short float of 8.2% with 12.32 days to cover. Shares are down 9% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates CenturyLink as a buy. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • CENTURYLINK INC's earnings per share declined by 19.5% 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, CENTURYLINK INC turned its bottom line around by earning $1.35 versus -$0.43 in the prior year. This year, the market expects an improvement in earnings ($2.56 versus $1.35).
  • Net operating cash flow has slightly increased to $1,251.00 million or 8.68% when compared to the same quarter last year. Despite an increase in cash flow, CENTURYLINK INC's average is still marginally south of the industry average growth rate of 11.32%.
  • The gross profit margin for CENTURYLINK INC is rather high; currently it is at 56.38%. Regardless of CTL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 4.23% trails the industry average.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 3.7%. Since the same quarter one year prior, revenues slightly dropped by 2.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to the other companies in the Diversified Telecommunication Services industry and the overall market, CENTURYLINK INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.

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