MeadWestvaco (MWV) Shows 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 MeadWestvaco ( MWV) 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 MeadWestvaco as such a stock due to the following factors:

  • MWV has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $44.6 million.
  • MWV has traded 271,402 shares today.
  • MWV traded in a range 205.1% of the normal price range with a price range of $1.44.
  • MWV traded below its daily resistance level (quality: 17 days, meaning that the stock is crossing a resistance level set by the last 17 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 MWV:

MeadWestvaco Corporation provides packaging solutions to the healthcare, beauty and personal care, food, beverage, home and garden, tobacco, and agricultural industries worldwide. The stock currently has a dividend yield of 2%. MWV has a PE ratio of 33. Currently there are 2 analysts that rate MeadWestvaco a buy, 2 analysts rate it a sell, and 3 rate it a hold.

The average volume for MeadWestvaco has been 1.0 million shares per day over the past 30 days. MeadWestvaco has a market cap of $8.4 billion and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 0.62 and a short float of 1.2% with 1.82 days to cover. Shares are up 12.7% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates MeadWestvaco as a buy. The company's strengths can be seen in multiple areas, such as its increase in net income, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and solid stock price performance. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Containers & Packaging industry average. The net income increased by 6.5% when compared to the same quarter one year prior, going from $31.00 million to $33.00 million.
  • The debt-to-equity ratio is somewhat low, currently at 0.60, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.01, which illustrates the ability to avoid short-term cash problems.
  • Net operating cash flow has increased to -$113.00 million or 45.67% when compared to the same quarter last year. Despite an increase in cash flow of 45.67%, MEADWESTVACO CORP is still growing at a significantly lower rate than the industry average of 110.52%.
  • MEADWESTVACO CORP reported flat earnings per share in the most recent quarter. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, MEADWESTVACO CORP reported lower earnings of $1.52 versus $1.78 in the prior year. This year, the market expects an improvement in earnings ($1.80 versus $1.52).
  • MWV, with its decline in revenue, slightly underperformed the industry average of 0.4%. Since the same quarter one year prior, revenues slightly dropped by 3.0%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.

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