Edison International (EIX) Showing 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 Edison International ( EIX) 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 Edison International as such a stock due to the following factors:

  • EIX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $98.9 million.
  • EIX has traded 2.3 million shares today.
  • EIX traded in a range 247% of the normal price range with a price range of $2.04.
  • EIX traded below its daily resistance level (quality: 266 days, meaning that the stock is crossing a resistance level set by the last 266 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 EIX:

Edison International, through its subsidiaries, generates and supplies electricity. The company generates electricity through hydroelectric, diesel, natural gas, nuclear, and photovoltaic sources. The stock currently has a dividend yield of 2.9%. EIX has a PE ratio of 13. Currently there are 11 analysts that rate Edison International a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Edison International has been 2.1 million shares per day over the past 30 days. Edison International has a market cap of $19.0 billion and is part of the utilities sector and utilities industry. The stock has a beta of 0.51 and a short float of 1.5% with 2.78 days to cover. Shares are down 12% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Edison International as a buy. The company's strengths can be seen in multiple areas, such as its expanding profit margins, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures, notable return on equity and impressive record of earnings per share growth. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:
  • 39.85% is the gross profit margin for EDISON INTERNATIONAL which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 13.01% is above that of the industry average.
  • Net operating cash flow has significantly increased by 93.57% to $964.00 million when compared to the same quarter last year. In addition, EDISON INTERNATIONAL has also vastly surpassed the industry average cash flow growth rate of 18.22%.
  • The debt-to-equity ratio is somewhat low, currently at 0.96, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.19 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Electric Utilities industry and the overall market on the basis of return on equity, EDISON INTERNATIONAL has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • EDISON INTERNATIONAL has improved earnings per share by 49.2% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, EDISON INTERNATIONAL increased its bottom line by earning $4.34 versus $2.67 in the prior year. For the next year, the market is expecting a contraction of 17.2% in earnings ($3.60 versus $4.34).

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