Canadian Pacific Railway (CP) 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 Canadian Pacific Railway ( CP) 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 Canadian Pacific Railway as such a stock due to the following factors:

  • CP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $183.1 million.
  • CP has traded 687,392 shares today.
  • CP traded in a range 200.4% of the normal price range with a price range of $5.80.
  • CP traded below its daily resistance level (quality: 398 days, meaning that the stock is crossing a resistance level set by the last 398 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 CP:

Canadian Pacific Railway Limited, through its subsidiaries, operates a transcontinental railway in Canada and the United States. The company provides logistics and supply chain expertise services. The stock currently has a dividend yield of 0.7%. CP has a PE ratio of 24. Currently there are 11 analysts that rate Canadian Pacific Railway a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Canadian Pacific Railway has been 1.0 million shares per day over the past 30 days. Canadian Pacific Railway has a market cap of $27.6 billion and is part of the services sector and transportation industry. Shares are down 12.9% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Canadian Pacific Railway as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, compelling growth in net income, notable return on equity and expanding profit margins. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • CP's revenue growth has slightly outpaced the industry average of 0.8%. Since the same quarter one year prior, revenues rose by 10.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • CANADIAN PACIFIC RAILWAY LTD has improved earnings per share by 33.3% 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 two years. We feel that this trend should continue. During the past fiscal year, CANADIAN PACIFIC RAILWAY LTD increased its bottom line by earning $8.49 versus $4.98 in the prior year. This year, the market expects an improvement in earnings ($10.75 versus $8.49).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Road & Rail industry. The net income increased by 26.0% when compared to the same quarter one year prior, rising from $254.00 million to $320.00 million.
  • 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. When compared to other companies in the Road & Rail industry and the overall market, CANADIAN PACIFIC RAILWAY LTD's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • 43.66% is the gross profit margin for CANADIAN PACIFIC RAILWAY LTD which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 19.21% is above that of the industry average.

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