NEW YORK (TheStreet) -- Q: What are we looking for?
A: A stock in an uptrend that pays a dividend. Sounds good without being too greedy.
The natural gas stock WGL Holdings (WGL) fits the bill.
This chart of WGL, above, shows us a number of useful technical clues.
After a nine-month sideways consolidation, WGL broke out to new highs earlier this month. The slope of the 50-day moving average is positive, and the On-Balance-Volume (OBV) line is in a slow and steady ascent.
This longer-term view of WGL, above, is also positive.
Prices are above the rising 40-week, or 200-day, moving average. Notice the broad consolidation around the $40 level from 2011 through most of 2014. This kind of base can support a lengthy rally.
Our price targets for WGL are $70 and then $80, a double from the $40 base. A move down below the mid-point of the nine-month $52-$58 consolidation, i.e. below $55, would get us to re-examine our bullish view of WGL.
Separately, TheStreet Ratings team rates WGL HOLDINGS INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
We rate WGL HOLDINGS INC (WGL) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, notable return on equity, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company shows low profit margins.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Compared to its closing price of one year ago, WGL's share price has jumped by 35.52%, exceeding the performance of the broader market during that same time frame. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Gas Utilities industry and the overall market, WGL HOLDINGS INC's return on equity exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has slightly increased to $207.20 million or 3.17% when compared to the same quarter last year. In addition, WGL HOLDINGS INC has also modestly surpassed the industry average cash flow growth rate of 1.46%.
- WGL HOLDINGS INC's earnings per share declined by 39.1% 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, WGL HOLDINGS INC increased its bottom line by earning $2.05 versus $1.55 in the prior year. This year, the market expects an improvement in earnings ($3.00 versus $2.05).
- The debt-to-equity ratio is somewhat low, currently at 0.89, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.43 is very weak and demonstrates a lack of ability to pay short-term obligations.
- You can view the full analysis from the report here: WGL