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 Atmel ( ATML) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Atmel as such a stock due to the following factors:

  • ATML has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $50.9 million.
  • ATML has traded 11.5 million shares today.
  • ATML is trading at 3.14 times the normal volume for the stock at this time of day.
  • ATML crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

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More details on ATML:

Atmel Corporation designs, develops, manufactures, and sells semiconductor integrated circuit products primarily in the United States, Asia, Europe, South Africa, and Central and South America. The stock currently has a dividend yield of 1.9%. ATML has a PE ratio of 78. Currently there are 8 analysts that rate Atmel a buy, 1 analyst rates it a sell, and 2 rate it a hold.

The average volume for Atmel has been 6.3 million shares per day over the past 30 days. Atmel has a market cap of $3.6 billion and is part of the technology sector and electronics industry. The stock has a beta of 0.60 and a short float of 3.5% with 2.05 days to cover. Shares are up 1.9% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

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

Highlights from the ratings report include:
  • ATMEL CORP 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, ATMEL CORP turned its bottom line around by earning $0.08 versus -$0.05 in the prior year. This year, the market expects an improvement in earnings ($0.46 versus $0.08).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 661.5% when compared to the same quarter one year prior, rising from $2.17 million to $16.50 million.
  • 49.89% is the gross profit margin for ATMEL CORP which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, ATML's net profit margin of 5.18% significantly trails the industry average.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 12.6%. Since the same quarter one year prior, revenues slightly dropped by 5.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • 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. In comparison to the other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, ATMEL CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.

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