Water-Logged And Getting Wetter: Harley-Davidson (HOG)

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 Harley-Davidson ( HOG) 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 Harley-Davidson as such a stock due to the following factors:

  • HOG has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $144.4 million.
  • HOG has traded 1.8 million shares today.
  • HOG traded in a range 232.2% of the normal price range with a price range of $2.12.
  • HOG traded below its daily resistance level (quality: 11 days, meaning that the stock is crossing a resistance level set by the last 11 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 HOG:

Harley-Davidson, Inc. manufactures cruiser and touring motorcycles. The company operates in two segments, Motorcycles & Related Products and Financial Services. The stock currently has a dividend yield of 2.2%. HOG has a PE ratio of 14. Currently there are 8 analysts that rate Harley-Davidson a buy, no analysts rate it a sell, and 8 rate it a hold.

The average volume for Harley-Davidson has been 2.5 million shares per day over the past 30 days. Harley-Davidson has a market cap of $11.9 billion and is part of the consumer goods sector and automotive industry. The stock has a beta of 1.01 and a short float of 4.6% with 4.01 days to cover. Shares are down 13.6% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Harley-Davidson 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, growth in earnings per share and attractive valuation levels. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Automobiles industry average. The net income increased by 1.5% when compared to the same quarter one year prior, going from $265.92 million to $269.85 million.
  • 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 Automobiles industry and the overall market, HARLEY-DAVIDSON INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • 47.74% is the gross profit margin for HARLEY-DAVIDSON INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 16.13% is above that of the industry average.
  • HARLEY-DAVIDSON INC's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, HARLEY-DAVIDSON INC increased its bottom line by earning $3.87 versus $3.27 in the prior year. This year, the market expects an improvement in earnings ($4.00 versus $3.87).
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 6.6%. Since the same quarter one year prior, revenues slightly dropped by 3.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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