ConAgra Foods (CAG) Showing 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 ConAgra Foods ( CAG) 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 ConAgra Foods as such a stock due to the following factors:

  • CAG has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $92.7 million.
  • CAG has traded 906,502 shares today.
  • CAG traded in a range 208.8% of the normal price range with a price range of $0.93.
  • CAG traded below its daily resistance level (quality: 18 days, meaning that the stock is crossing a resistance level set by the last 18 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 CAG:

ConAgra Foods, Inc. operates as a food company primarily in North America. The company operates through three segments: Consumer Foods, Commercial Foods, and Private Brands. The stock currently has a dividend yield of 2.6%. Currently there are 2 analysts that rate ConAgra Foods a buy, 1 analyst rates it a sell, and 5 rate it a hold.

The average volume for ConAgra Foods has been 2.5 million shares per day over the past 30 days. ConAgra has a market cap of $16.5 billion and is part of the consumer goods sector and food & beverage industry. The stock has a beta of 0.46 and a short float of 1.7% with 3.14 days to cover. Shares are up 7.1% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates ConAgra Foods as a hold. Among the primary strengths of the company is its solid stock price performance. At the same time, however, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity.

Highlights from the ratings report include:
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 10.8%. Since the same quarter one year prior, revenues slightly dropped by 1.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • CONAGRA FOODS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, CONAGRA FOODS INC reported lower earnings of $0.54 versus $1.87 in the prior year. This year, the market expects an improvement in earnings ($2.17 versus $0.54).
  • The gross profit margin for CONAGRA FOODS INC is currently lower than what is desirable, coming in at 25.02%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -24.61% is significantly below that of the industry average.
  • Net operating cash flow has decreased to $322.80 million or 16.50% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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