Builders FirstSource (BLDR) Strong On High Relative Volume Today

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 Builders FirstSource ( BLDR) as a strong on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Builders FirstSource as such a stock due to the following factors:

  • BLDR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $4.0 million.
  • BLDR has traded 121,512 shares today.
  • BLDR is trading at 2.79 times the normal volume for the stock at this time of day.
  • BLDR is trading at a new high 3.08% above yesterday's close.

'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on BLDR:

Builders FirstSource, Inc. manufactures and supplies structural and related building products for residential new construction primarily in the southern and eastern United States. BLDR has a PE ratio of 9. Currently there are 4 analysts that rate Builders FirstSource a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Builders FirstSource has been 995,000 shares per day over the past 30 days. Builders FirstSource has a market cap of $1.2 billion and is part of the industrial goods sector and materials & construction industry. The stock has a beta of 1.65 and a short float of 10% with 15.65 days to cover. Shares are up 79.8% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Builders FirstSource as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and weak operating cash flow.

Highlights from the ratings report include:
  • BLDR's revenue growth has slightly outpaced the industry average of 0.3%. Since the same quarter one year prior, revenues slightly increased by 7.2%. 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.
  • 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. Compared to other companies in the Building Products industry and the overall market, BUILDERS FIRSTSOURCE's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • BUILDERS FIRSTSOURCE 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. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, BUILDERS FIRSTSOURCE turned its bottom line around by earning $0.15 versus -$0.44 in the prior year. This year, the market expects an improvement in earnings ($0.28 versus $0.15).
  • 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 Building Products industry. The net income has significantly decreased by 108.9% when compared to the same quarter one year ago, falling from -$3.38 million to -$7.07 million.
  • The debt-to-equity ratio is very high at 12.03 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, BLDR maintains a poor quick ratio of 0.88, which illustrates the inability to avoid short-term cash problems.

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