Trade-Ideas LLC identified Lear ( LEA) 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 Lear as such a stock due to the following factors:

  • LEA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $67.1 million.
  • LEA has traded 305,620 shares today.
  • LEA is trading at 2.15 times the normal volume for the stock at this time of day.
  • LEA 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 LEA:

Lear Corporation designs, develops, engineers, manufactures, assembles, and supplies automotive seating, electrical distribution systems, and related components primarily to automotive original equipment manufacturers worldwide. It operates in two segments, Seating and Electrical. The stock currently has a dividend yield of 1.1%. LEA has a PE ratio of 1. Currently there are 8 analysts that rate Lear a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Lear has been 760,500 shares per day over the past 30 days. Lear has a market cap of $8.4 billion and is part of the consumer goods sector and automotive industry. The stock has a beta of 1.49 and a short float of 6% with 6.66 days to cover. Shares are down 4.3% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Lear as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, compelling growth in net income, notable return on equity and attractive valuation levels. We feel its strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • LEA's revenue growth has slightly outpaced the industry average of 0.1%. Since the same quarter one year prior, revenues slightly increased by 3.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • LEAR CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, LEAR CORP increased its bottom line by earning $9.60 versus $8.24 in the prior year. This year, the market expects an improvement in earnings ($12.85 versus $9.60).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Auto Components industry. The net income increased by 68.6% when compared to the same quarter one year prior, rising from $147.30 million to $248.40 million.
  • 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. When compared to other companies in the Auto Components industry and the overall market, LEAR CORP's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.

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