Western Refining (WNR) Showing Signs Of Being A Roof Leaker

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 Western Refining ( WNR) 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 Western Refining as such a stock due to the following factors:

  • WNR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $66.6 million.
  • WNR has traded 1.0 million shares today.
  • WNR is trading at 1.73 times the normal volume for the stock at this time of day.
  • WNR 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 WNR:

Western Refining, Inc. operates as an independent crude oil refiner and marketer of refined products. The company operates in four segments: Refining, NTI, WNRL, and Retail. The stock currently has a dividend yield of 3%. WNR has a PE ratio of 7.9. Currently there are 3 analysts that rate Western Refining a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Western Refining has been 1.7 million shares per day over the past 30 days. Western Refining has a market cap of $4.3 billion and is part of the basic materials sector and energy industry. The stock has a beta of 1.65 and a short float of 5.7% with 2.40 days to cover. Shares are up 18% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Western Refining as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, attractive valuation levels, good cash flow from operations and compelling growth in net income. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 33.1%. Since the same quarter one year prior, revenues slightly increased by 0.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, WESTERN REFINING INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 1886.8% when compared to the same quarter one year prior, rising from -$7.33 million to $130.94 million.
  • Net operating cash flow has significantly increased by 162.24% to $243.58 million when compared to the same quarter last year. In addition, WESTERN REFINING INC has also vastly surpassed the industry average cash flow growth rate of -42.26%.

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