Valspar (VAL) Shows Signs Of Being Water-Logged And Getting Wetter

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 Valspar ( VAL) 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 Valspar as such a stock due to the following factors:

  • VAL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $51.2 million.
  • VAL has traded 61,798 shares today.
  • VAL traded in a range 251.5% of the normal price range with a price range of $2.66.
  • VAL traded below its daily resistance level (quality: 8 days, meaning that the stock is crossing a resistance level set by the last 8 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 VAL:

The Valspar Corporation develops, manufactures, and distributes a range of coatings, paints, and related products worldwide. It operates in two segments, Coatings and Paints. The stock currently has a dividend yield of 1.4%. VAL has a PE ratio of 19. Currently there are 5 analysts that rate Valspar a buy, 1 analyst rates it a sell, and 6 rate it a hold.

The average volume for Valspar has been 569,700 shares per day over the past 30 days. Valspar has a market cap of $7.0 billion and is part of the basic materials sector and chemicals industry. The stock has a beta of 1.30 and a short float of 4.1% with 5.70 days to cover. Shares are down 0.6% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Valspar as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, impressive record of earnings per share growth, compelling growth in net income 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:
  • The revenue growth came in higher than the industry average of 14.0%. Since the same quarter one year prior, revenues slightly increased by 3.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • VALSPAR CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. 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, VALSPAR CORP increased its bottom line by earning $4.02 versus $3.20 in the prior year. This year, the market expects an improvement in earnings ($4.60 versus $4.02).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Chemicals industry. The net income increased by 94.2% when compared to the same quarter one year prior, rising from $53.55 million to $103.97 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. In comparison to other companies in the Chemicals industry and the overall market on the basis of return on equity, VALSPAR CORP has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.

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