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

  • FLS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $59.1 million.
  • FLS has traded 155,304 shares today.
  • FLS is trading at 1.83 times the normal volume for the stock at this time of day.
  • FLS 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 FLS:

Flowserve Corporation designs, manufactures, distributes, and services industrial flow management equipment worldwide. The company operates through three segments: Engineered Product Division (EPD), Industrial Product Division (IPD), and Flow Control Division (FCD). The stock currently has a dividend yield of 1.5%. FLS has a PE ratio of 24. Currently there are 3 analysts that rate Flowserve a buy, 1 analyst rates it a sell, and 13 rate it a hold.

The average volume for Flowserve has been 1.2 million shares per day over the past 30 days. Flowserve has a market cap of $6.6 billion and is part of the industrial goods sector and industrial industry. The stock has a beta of 1.51 and a short float of 5% with 4.51 days to cover. Shares are up 8.1% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Flowserve as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, good cash flow from operations and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and disappointing return on equity.

Highlights from the ratings report include:
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Machinery industry. The net income increased by 36.8% when compared to the same quarter one year prior, rising from $27.67 million to $37.86 million.
  • Net operating cash flow has significantly increased by 91.42% to -$8.00 million when compared to the same quarter last year. In addition, FLOWSERVE CORP has also vastly surpassed the industry average cash flow growth rate of -10.44%.
  • FLOWSERVE CORP has improved earnings per share by 45.0% 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, FLOWSERVE CORP reported lower earnings of $2.00 versus $3.77 in the prior year. This year, the market expects an improvement in earnings ($2.50 versus $2.00).
  • 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 Machinery industry and the overall market on the basis of return on equity, FLOWSERVE CORP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • FLS has underperformed the S&P 500 Index, declining 7.07% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.

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