Water-Logged And Getting Wetter: Flextronics International (FLEX)

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 Flextronics International ( FLEX) 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 Flextronics International as such a stock due to the following factors:

  • FLEX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $44.4 million.
  • FLEX has traded 2.2 million shares today.
  • FLEX traded in a range 237.8% of the normal price range with a price range of $0.41.
  • FLEX traded below its daily resistance level (quality: 146 days, meaning that the stock is crossing a resistance level set by the last 146 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 FLEX:

Flextronics International Ltd. provides design, manufacturing, and supply chain services and solutions to original equipment manufacturers worldwide. FLEX has a PE ratio of 12. Currently there are 3 analysts that rate Flextronics International a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Flextronics International has been 3.5 million shares per day over the past 30 days. Flextronics International has a market cap of $6.7 billion and is part of the technology sector and electronics industry. Shares are up 5.9% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Flextronics International as a buy. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, impressive record of earnings per share growth, compelling growth in net income, notable return on equity and good cash flow from operations. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • FLEXTRONICS INTERNATIONAL reported significant earnings per share improvement 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, FLEXTRONICS INTERNATIONAL increased its bottom line by earning $1.01 versus $0.58 in the prior year. This year, the market expects an improvement in earnings ($1.08 versus $1.01).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Electronic Equipment, Instruments & Components industry. The net income increased by 214.4% when compared to the same quarter one year prior, rising from $42.98 million to $135.11 million.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Electronic Equipment, Instruments & Components industry and the overall market, FLEXTRONICS INTERNATIONAL's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has increased to $124.61 million or 26.95% when compared to the same quarter last year. In addition, FLEXTRONICS INTERNATIONAL has also vastly surpassed the industry average cash flow growth rate of -29.54%.

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