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 Starz ( STRZA) 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 Starz as such a stock due to the following factors:

  • STRZA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $55.8 million.
  • STRZA has traded 1.2 million shares today.
  • STRZA is trading at 3.48 times the normal volume for the stock at this time of day.
  • STRZA 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 STRZA:

Starz, through its subsidiaries, operates as a media and entertainment company. It operates through Starz Networks, Starz Distribution, and Starz Animation segments. The Starz Networks segment provides premium subscription video programming to U.S. STRZA has a PE ratio of 15. Currently there are 3 analysts that rate Starz a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for Starz has been 851,400 shares per day over the past 30 days. Starz has a market cap of $3.6 billion and is part of the services sector and media industry. The stock has a beta of 1.06 and a short float of 9% with 5.11 days to cover. Shares are up 28.1% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Starz as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, unimpressive growth in net income and generally higher debt management risk.

Highlights from the ratings report include:
  • Compared to its closing price of one year ago, STRZA's share price has jumped by 39.97%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 6.7%. Since the same quarter one year prior, revenues slightly increased by 1.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • STARZ' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, STARZ increased its bottom line by earning $2.43 versus $2.04 in the prior year. This year, the market expects an improvement in earnings ($2.65 versus $2.43).
  • Although STRZA's debt-to-equity ratio of 6.62 is very high, it is currently less than that of the industry average. Even though the debt-to-equity ratio is weak, STRZA's quick ratio is somewhat strong at 1.16, demonstrating the ability to handle short-term liquidity needs.
  • Net operating cash flow has significantly decreased to -$20.20 million or 208.02% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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