Trade-Ideas LLC identified Franco-Nevada ( FNV) 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 Franco-Nevada as such a stock due to the following factors:

  • FNV has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $53.6 million.
  • FNV has traded 765,544 shares today.
  • FNV is trading at 1.95 times the normal volume for the stock at this time of day.
  • FNV 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 FNV:

Franco-Nevada Corporation operates as a gold-focused royalty and stream company in the United States, Canada, Latin America, and internationally. The stock currently has a dividend yield of 1.7%. FNV has a PE ratio of 105. Currently there are 5 analysts that rate Franco-Nevada a buy, 1 analyst rates it a sell, and 1 rates it a hold.

The average volume for Franco-Nevada has been 1.3 million shares per day over the past 30 days. Franco-Nevada has a market cap of $8.4 billion and is part of the basic materials sector and metals & mining industry. Shares are up 1.9% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Franco-Nevada as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, notable return on equity and expanding profit margins. We feel its strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 46.1%. Since the same quarter one year prior, revenues slightly increased by 1.6%. 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.
  • FNV has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 27.24, which clearly demonstrates the ability to cover short-term cash needs.
  • Net operating cash flow has increased to $60.10 million or 21.16% when compared to the same quarter last year. In addition, FRANCO-NEVADA CORP has also vastly surpassed the industry average cash flow growth rate of -54.13%.
  • 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. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, FRANCO-NEVADA CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • The gross profit margin for FRANCO-NEVADA CORP is currently very high, coming in at 76.87%. Regardless of FNV's high profit margin, it has managed to decrease from the same period last year.

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