Water-Logged And Getting Wetter: Urban Outfitters (URBN)

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 Urban Outfitters ( URBN) 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 Urban Outfitters as such a stock due to the following factors:

  • URBN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $59.3 million.
  • URBN has traded 113,804 shares today.
  • URBN traded in a range 217.9% of the normal price range with a price range of $1.74.
  • URBN traded below its daily resistance level (quality: 1 day, meaning that the stock is crossing a resistance level set by the last 1 calendar day. 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 URBN:

Urban Outfitters, Inc., a lifestyle specialty retail company, engages in the retail and wholesale of general consumer products. The company operates in two segments, Retail and Wholesale. URBN has a PE ratio of 24. Currently there are 16 analysts that rate Urban Outfitters a buy, no analysts rate it a sell, and 15 rate it a hold.

The average volume for Urban Outfitters has been 1.8 million shares per day over the past 30 days. Urban Outfitters has a market cap of $5.3 billion and is part of the services sector and retail industry. The stock has a beta of 0.58 and a short float of 7.6% with 5.40 days to cover. Shares are up 14.3% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Urban Outfitters as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, largely solid financial position with reasonable debt levels by most measures, notable return on equity and expanding profit margins. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 12.1%. Since the same quarter one year prior, revenues rose by 11.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. 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.
  • URBN has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.93 is somewhat weak and could be cause for future problems.
  • 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 Specialty Retail industry and the overall market on the basis of return on equity, URBAN OUTFITTERS INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • 38.02% is the gross profit margin for URBAN OUTFITTERS INC which we consider to be strong. Regardless of URBN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, URBN's net profit margin of 7.94% compares favorably to the industry average.

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