Best Buy (BBY) Marked As Today's Roof Leaker 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 Best Buy ( BBY) 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 Best Buy as such a stock due to the following factors:

  • BBY has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $117.6 million.
  • BBY has traded 600,050 shares today.
  • BBY is trading at 2.51 times the normal volume for the stock at this time of day.
  • BBY 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 BBY:

Best Buy Co., Inc. operates as a retailer of technology products, services, and solutions in the United States and internationally. The stock currently has a dividend yield of 2.5%. BBY has a PE ratio of 1. Currently there are 12 analysts that rate Best Buy a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for Best Buy has been 4.4 million shares per day over the past 30 days. Best Buy has a market cap of $13.0 billion and is part of the services sector and retail industry. The stock has a beta of 3.08 and a short float of 10.7% with 8.94 days to cover. Shares are down 5.6% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Best Buy as a buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth, solid stock price performance, attractive valuation levels and good cash flow from operations. We feel its strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Specialty Retail industry. The net income increased by 77.1% when compared to the same quarter one year prior, rising from $293.00 million to $519.00 million.
  • BBY's revenue growth trails the industry average of 12.1%. Since the same quarter one year prior, revenues slightly increased by 1.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 72.94% and other important driving factors, this stock has surged by 43.04% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, BBY should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Net operating cash flow has significantly increased by 50.77% to $1,161.00 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 20.86%.

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