Trade-Ideas: Owens-Illinois (OI) Is Today's

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 Owens-Illinois ( OI) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Owens-Illinois as such a stock due to the following factors:

  • OI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $68.0 million.
  • OI has traded 5.1 million shares today.
  • OI is trading at 6.00 times the normal volume for the stock at this time of day.
  • OI crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on OI:

Owens-Illinois, Inc., through its subsidiaries, manufactures and sells glass container products to food and beverage manufacturers primarily in Europe, North America, South America, and the Asia Pacific. OI has a PE ratio of 59. Currently there is 1 analyst that rates Owens-Illinois a buy, 1 analyst rates it a sell, and 9 rate it a hold.

The average volume for Owens-Illinois has been 1.8 million shares per day over the past 30 days. Owens-Illinois has a market cap of $3.9 billion and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 1.99 and a short float of 3.9% with 2.46 days to cover. Shares are down 10.5% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Owens-Illinois as a hold. The company's strongest point has been its expanding profit margins. At the same time, however, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity.

Highlights from the ratings report include:
  • OI, with its decline in revenue, underperformed when compared the industry average of 0.1%. Since the same quarter one year prior, revenues fell by 13.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • OWENS-ILLINOIS INC's earnings per share declined by 29.0% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, OWENS-ILLINOIS INC reported lower earnings of $0.59 versus $1.20 in the prior year. This year, the market expects an improvement in earnings ($2.16 versus $0.59).
  • The gross profit margin for OWENS-ILLINOIS INC is currently lower than what is desirable, coming in at 25.55%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 4.99% is above that of the industry average.
  • The debt-to-equity ratio is very high at 4.00 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, OI has a quick ratio of 0.53, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Containers & Packaging industry and the overall market, OWENS-ILLINOIS INC's return on equity is below that of both the industry average and the S&P 500.

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