Trade-Ideas LLC identified Sanderson Farms ( SAFM) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Sanderson Farms as such a stock due to the following factors:

  • SAFM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $41.6 million.
  • SAFM has traded 491,071 shares today.
  • SAFM traded in a range 205.3% of the normal price range with a price range of $5.23.
  • SAFM traded below its daily resistance level (quality: 7 days, meaning that the stock is crossing a resistance level set by the last 7 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in SAFM with the Ticky from Trade-Ideas. See the FREE profile for SAFM NOW at Trade-Ideas

More details on SAFM:

Sanderson Farms, Inc., an integrated poultry processing company, produces, processes, markets, and distributes fresh, frozen, and prepared chicken products in the United States. The stock currently has a dividend yield of 1.1%. SAFM has a PE ratio of 8. Currently there are 2 analysts that rate Sanderson Farms a buy, 1 analyst rates it a sell, and 1 rates it a hold.

The average volume for Sanderson Farms has been 428,200 shares per day over the past 30 days. Sanderson Farms has a market cap of $1.8 billion and is part of the consumer goods sector and food & beverage industry. The stock has a beta of 0.92 and a short float of 35.2% with 12.95 days to cover. Shares are up 4.5% year-to-date as of the close of trading on Thursday.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Sanderson Farms as a buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, attractive valuation levels and notable return on equity. We feel its strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.

Highlights from the ratings report include:
  • SAFM's debt-to-equity ratio is very low at 0.01 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, SAFM has a quick ratio of 2.02, which demonstrates the ability of the company to cover short-term liquidity needs.
  • SAFM, with its decline in revenue, underperformed when compared the industry average of 2.3%. Since the same quarter one year prior, revenues fell by 10.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Food Products industry and the overall market, SANDERSON FARMS INC's return on equity exceeds that of both the industry average and the S&P 500.
  • The share price of SANDERSON FARMS INC is down 8.63% when compared to where it was trading one year earlier. This reflects both (a) the trend in the overall market as well as (b) the sharp decline in the company's earnings per share. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.