Today's Water-Logged And Getting Wetter Stock: Colgate-Palmolive (CL)

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 Colgate-Palmolive ( CL) 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 Colgate-Palmolive as such a stock due to the following factors:

  • CL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $156.7 million.
  • CL has traded 2.7 million shares today.
  • CL traded in a range 201.1% of the normal price range with a price range of $1.37.
  • CL traded below its daily resistance level (quality: 24 days, meaning that the stock is crossing a resistance level set by the last 24 calendar days. 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 CL:

Colgate-Palmolive Company, together with its subsidiaries, manufactures and markets consumer products worldwide. It operates in two segments: Oral, Personal and Home Care; and Pet Nutrition. The stock currently has a dividend yield of 2.2%. CL has a PE ratio of 27. Currently there are 3 analysts that rate Colgate-Palmolive a buy, no analysts rate it a sell, and 14 rate it a hold.

The average volume for Colgate-Palmolive has been 2.7 million shares per day over the past 30 days. Colgate-Palmolive has a market cap of $62.0 billion and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 0.83 and a short float of 0.8% with 2.68 days to cover. Shares are down 1% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Colgate-Palmolive as a buy. The company's strengths can be seen in multiple areas, such as its increase in net income, notable return on equity, expanding profit margins and growth in earnings per share. 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:
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Household Products industry. The net income increased by 39.7% when compared to the same quarter one year prior, rising from $388.00 million to $542.00 million.
  • 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 Household Products industry and the overall market, COLGATE-PALMOLIVE CO's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for COLGATE-PALMOLIVE CO is rather high; currently it is at 61.67%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 13.31% is above that of the industry average.
  • COLGATE-PALMOLIVE CO has improved earnings per share by 40.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, COLGATE-PALMOLIVE CO reported lower earnings of $2.36 versus $2.39 in the prior year. This year, the market expects an improvement in earnings ($2.88 versus $2.36).
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 9.9%. Since the same quarter one year prior, revenues slightly dropped by 5.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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