Hershey (HSY) 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 Hershey ( HSY) 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 Hershey as such a stock due to the following factors:

  • HSY has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $91.0 million.
  • HSY has traded 1.9 million shares today.
  • HSY traded in a range 212.8% of the normal price range with a price range of $2.07.
  • HSY traded below its daily resistance level (quality: 316 days, meaning that the stock is crossing a resistance level set by the last 316 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 HSY:

The Hershey Company manufactures, imports, markets, distributes, and sells confectionery products. The company operates through two segments, North America; and International and Other. The stock currently has a dividend yield of 2.3%. HSY has a PE ratio of 25. Currently there are 2 analysts that rate Hershey a buy, no analysts rate it a sell, and 8 rate it a hold.

The average volume for Hershey has been 1.1 million shares per day over the past 30 days. Hershey has a market cap of $14.6 billion and is part of the consumer goods sector and food & beverage industry. The stock has a beta of 0.95 and a short float of 2.4% with 3.42 days to cover. Shares are down 11% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Hershey as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, expanding profit margins and good cash flow from operations. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 11.1%. Since the same quarter one year prior, revenues slightly increased by 3.5%. 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 Food Products industry and the overall market, HERSHEY CO's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • 49.57% is the gross profit margin for HERSHEY CO which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 12.62% is above that of the industry average.
  • HERSHEY CO reported flat earnings per share in the most recent quarter. 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, HERSHEY CO increased its bottom line by earning $3.77 versus $3.61 in the prior year. This year, the market expects an improvement in earnings ($4.32 versus $3.77).
  • Net operating cash flow has increased to $256.40 million or 25.83% when compared to the same quarter last year. Despite an increase in cash flow of 25.83%, HERSHEY CO is still growing at a significantly lower rate than the industry average of 79.72%.

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