Water-Logged And Getting Wetter Stock Of The Day: SeaWorld Entertainment (SEAS)

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 SeaWorld Entertainment ( SEAS) 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 SeaWorld Entertainment as such a stock due to the following factors:

  • SEAS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $36.8 million.
  • SEAS has traded 1.7 million shares today.
  • SEAS traded in a range 208.7% of the normal price range with a price range of $0.82.
  • SEAS traded below its daily resistance level (quality: 110 days, meaning that the stock is crossing a resistance level set by the last 110 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 SEAS:

SeaWorld Entertainment, Inc. operates as a theme park and entertainment company in the United States. The stock currently has a dividend yield of 4.3%. SEAS has a PE ratio of 32. Currently there are 4 analysts that rate SeaWorld Entertainment a buy, 1 analyst rates it a sell, and 4 rate it a hold.

The average volume for SeaWorld Entertainment has been 1.2 million shares per day over the past 30 days. SeaWorld Entertainment has a market cap of $1.8 billion and is part of the services sector and leisure industry. The stock has a beta of 0.04 and a short float of 18.2% with 5.34 days to cover. Shares are up 6% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates SeaWorld Entertainment as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, poor profit margins and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • SEAS's revenue growth has slightly outpaced the industry average of 7.2%. Since the same quarter one year prior, revenues slightly increased by 1.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income increased by 11.4% when compared to the same quarter one year prior, going from -$49.22 million to -$43.60 million.
  • SEAWORLD ENTERTAINMENT INC has improved earnings per share by 8.9% in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. However, the consensus estimates suggest that there will be an upward trend in the coming year. During the past fiscal year, SEAWORLD ENTERTAINMENT INC reported lower earnings of $0.58 versus $0.59 in the prior year. This year, the market expects an improvement in earnings ($0.88 versus $0.58).
  • The gross profit margin for SEAWORLD ENTERTAINMENT INC is rather low; currently it is at 20.91%. Regardless of SEAS's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, SEAS's net profit margin of -20.31% significantly underperformed when compared to the industry average.
  • The debt-to-equity ratio is very high at 3.26 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.25, which clearly demonstrates the inability to cover short-term cash needs.

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