Mead Johnson Nutrition (MJN) Falls Further As It's 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 Mead Johnson Nutrition ( MJN) 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 Mead Johnson Nutrition as such a stock due to the following factors:

  • MJN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $108.7 million.
  • MJN has traded 1.1 million shares today.
  • MJN traded in a range 368.1% of the normal price range with a price range of $4.32.
  • MJN traded below its daily resistance level (quality: 356 days, meaning that the stock is crossing a resistance level set by the last 356 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 MJN:

Mead Johnson Nutrition Company manufactures, distributes, and sells infant formulas, children's nutrition, and other nutritional products. The stock currently has a dividend yield of 1.8%. MJN has a PE ratio of 26. Currently there are 4 analysts that rate Mead Johnson Nutrition a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Mead Johnson Nutrition has been 1.3 million shares per day over the past 30 days. Mead Johnson Nutrition has a market cap of $19.1 billion and is part of the consumer goods sector and food & beverage industry. The stock has a beta of 1.17 and a short float of 1.3% with 2.19 days to cover. Shares are down 7.8% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Mead Johnson Nutrition as a buy. The company's strengths can be seen in multiple areas, such as its increase in net income, expanding profit margins, growth in earnings per share, increase in stock price during the past year and good cash flow from operations. 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 exceeded that of the S&P 500 and the Food Products industry average. The net income increased by 2.5% when compared to the same quarter one year prior, going from $202.40 million to $207.40 million.
  • The gross profit margin for MEAD JOHNSON NUTRITION CO is rather high; currently it is at 66.25%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 18.95% is above that of the industry average.
  • MEAD JOHNSON NUTRITION CO'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, MEAD JOHNSON NUTRITION CO increased its bottom line by earning $3.54 versus $3.35 in the prior year. This year, the market expects an improvement in earnings ($4.00 versus $3.54).
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • Net operating cash flow has increased to $274.50 million or 38.91% when compared to the same quarter last year. Despite an increase in cash flow, MEAD JOHNSON NUTRITION CO's cash flow growth rate is still lower than the industry average growth rate of 80.47%.

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