Roof Leaker To Watch: Citrix Systems (CTXS)

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 Citrix Systems ( CTXS) 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 Citrix Systems as such a stock due to the following factors:

  • CTXS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $126.4 million.
  • CTXS has traded 382,475 shares today.
  • CTXS is trading at 1.91 times the normal volume for the stock at this time of day.
  • CTXS 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 CTXS:

Citrix Systems, Inc. provides virtualization, mobility management, networking, and Software as a Service solutions worldwide. CTXS has a PE ratio of 49. Currently there are 10 analysts that rate Citrix Systems a buy, 3 analysts rate it a sell, and 11 rate it a hold.

The average volume for Citrix Systems has been 1.7 million shares per day over the past 30 days. Citrix Systems has a market cap of $10.6 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 1.66 and a short float of 2.8% with 2.28 days to cover. Shares are up 3.9% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Citrix Systems as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • CTXS's revenue growth has slightly outpaced the industry average of 5.0%. Since the same quarter one year prior, revenues slightly increased by 1.3%. 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.
  • Net operating cash flow has slightly increased to $291.87 million or 1.38% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -17.83%.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of 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.
  • CITRIX SYSTEMS INC's earnings per share declined by 40.0% in the most recent quarter compared to 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, CITRIX SYSTEMS INC reported lower earnings of $1.48 versus $1.81 in the prior year. This year, the market expects an improvement in earnings ($3.57 versus $1.48).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Software industry. The net income has significantly decreased by 48.4% when compared to the same quarter one year ago, falling from $55.94 million to $28.89 million.

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