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 Synaptics ( SYNA) 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 Synaptics as such a stock due to the following factors:

  • SYNA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $132.8 million.
  • SYNA has traded 2.6 million shares today.
  • SYNA is trading at 4.84 times the normal volume for the stock at this time of day.
  • SYNA 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 SYNA:

Synaptics Incorporated develops, markets, and sells custom-designed human interface solutions for electronic devices and products primarily in China, South Korea, Taiwan, the United States, Japan, and other countries. SYNA has a PE ratio of 27. Currently there are 7 analysts that rate Synaptics a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Synaptics has been 967,500 shares per day over the past 30 days. Synaptics has a market cap of $2.9 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 1.63 and a short float of 11.2% with 2.17 days to cover. Shares are up 15.2% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Synaptics as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, compelling growth in net income, good cash flow from operations and impressive record of earnings per share growth. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • SYNA's very impressive revenue growth greatly exceeded the industry average of 12.6%. Since the same quarter one year prior, revenues leaped by 133.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.33, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, SYNA has a quick ratio of 1.76, which demonstrates the ability of the company to cover short-term liquidity needs.
  • 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 178.6% when compared to the same quarter one year prior, rising from -$40.06 million to $31.48 million.
  • Net operating cash flow has significantly increased by 2304.37% to $128.13 million when compared to the same quarter last year. In addition, SYNAPTICS INC has also vastly surpassed the industry average cash flow growth rate of -84.46%.
  • SYNAPTICS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SYNAPTICS INC reported lower earnings of $1.25 versus $2.87 in the prior year. This year, the market expects an improvement in earnings ($5.80 versus $1.25).

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