Donaldson (DCI) Is Strong On High Volume Today

Trade-Ideas LLC identified Donaldson ( DCI) as a strong on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Donaldson as such a stock due to the following factors:

  • DCI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $19.8 million.
  • DCI has traded 452,774 shares today.
  • DCI is trading at 22.62 times the normal volume for the stock at this time of day.
  • DCI is trading at a new high 7.03% above yesterday's close.

'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on DCI:

Donaldson Company, Inc. manufactures and sells filtration systems and replacement parts worldwide. The company operates through two segments, Engine Products and Industrial Products. The stock currently has a dividend yield of 2.1%. DCI has a PE ratio of 25. Currently there are no analysts that rate Donaldson a buy, 1 analyst rates it a sell, and 10 rate it a hold.

The average volume for Donaldson has been 765,100 shares per day over the past 30 days. Donaldson has a market cap of $4.5 billion and is part of the industrial goods sector and industrial industry. The stock has a beta of 1.11 and a short float of 8.4% with 17.76 days to cover. Shares are up 16.1% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Donaldson as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • The debt-to-equity ratio is somewhat low, currently at 0.93, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.08, which illustrates the ability to avoid short-term cash problems.
  • Net operating cash flow has increased to $51.40 million or 42.46% when compared to the same quarter last year. In addition, DONALDSON CO INC has also vastly surpassed the industry average cash flow growth rate of -8.39%.
  • 36.68% is the gross profit margin for DONALDSON CO INC which we consider to be strong. Regardless of DCI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, DCI's net profit margin of 7.34% compares favorably to the industry average.
  • DONALDSON CO INC's earnings per share declined by 17.6% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, DONALDSON CO INC reported lower earnings of $1.48 versus $1.76 in the prior year. This year, the market expects an improvement in earnings ($1.52 versus $1.48).
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, DCI has underperformed the S&P 500 Index, declining 8.60% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.

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