Nordstrom (JWN) 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 Nordstrom ( JWN) 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 Nordstrom as such a stock due to the following factors:

  • JWN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $94.8 million.
  • JWN has traded 151,726 shares today.
  • JWN is trading at 2.15 times the normal volume for the stock at this time of day.
  • JWN 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 JWN:

Nordstrom, Inc., a fashion specialty retailer, offers apparel, shoes, cosmetics, and accessories for men, women, and children in the United States and Canada. It operates through two segments, Retail and Credit. The stock currently has a dividend yield of 1.9%. JWN has a PE ratio of 21. Currently there are 9 analysts that rate Nordstrom a buy, 2 analysts rate it a sell, and 13 rate it a hold.

The average volume for Nordstrom has been 1.2 million shares per day over the past 30 days. Nordstrom has a market cap of $14.6 billion and is part of the services sector and retail industry. The stock has a beta of 1.27 and a short float of 2.4% with 2.64 days to cover. Shares are down 3.1% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Nordstrom as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, expanding profit margins, good cash flow from operations and notable return on equity. We feel its 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:
  • JWN's revenue growth has slightly outpaced the industry average of 2.1%. Since the same quarter one year prior, revenues slightly increased by 8.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, JWN's share price has jumped by 26.55%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, JWN should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • NORDSTROM INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. We anticipate these figures will begin to experience more growth in the coming year. During the past fiscal year, NORDSTROM INC's EPS of $3.72 remained unchanged from the prior years' EPS of $3.72. This year, the market expects an improvement in earnings ($3.78 versus $3.72).
  • 41.58% is the gross profit margin for NORDSTROM INC which we consider to be strong. Regardless of JWN's high profit margin, it has managed to decrease from the same period last year.
  • Net operating cash flow has increased to $704.00 million or 16.94% when compared to the same quarter last year. Despite an increase in cash flow, NORDSTROM INC's average is still marginally south of the industry average growth rate of 26.02%.

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