Setting The Table – WDC, UTHR, VRSN, DNKN

Western Digital (WDC)

Western Digital (WDC)

WDC has formed a first stage flat base that is the fourth part of a base on base pattern. The current flat base is five weeks long, 10% deep, and has a pivot point of 49.50. The base saw distribution in its first week, but volume has been very light in the four weeks since then. After falling to its 10 week line in very light volume last week, the stock rebounded this week on increased, but still light volume.

In the past three quarters, WDC has reported earnings growth of 314%, 115%, and 38% as well as sales growth of 98%, 50%, and 92%. While the sales numbers are very strong, the decreasing earnings growth could be worrisome. Annual earnings are projected to be down for for each of the next two years. The stock does have a strong return on equity of 32%, but fund ownership hasn’t increased much in the past year and it is in a weak industry group.

United Therapeutics (UTHR)

UTHR was up 5.3% this week on volume that was 44% above average. The stock broke out of a 22 week long, first stage consolidation that contained four weeks of accumulation and two weeks of distribution. This was the third straight positive week for UTHR and it was also the second highest volume week since the stock started consolidating in September.

In the past three quarters, UTHR has reported earnings growth of 14%, 11%, and 108% as well as sales growth of 23%, 20%, and 25%. Annual earnings are projected to increase by 5% in 2013 and 13% in 2014. The stock has a very strong return on equity of 30% and is in a strong industry group, but has not increased fund ownership much in the past year.

Verisign (VRSN)

VRSN is currently in a first stage cup with handle base with a pivot point of 46.70. The base is 21 weeks long and 35% deep. The base contains three weeks of accumulation and three weeks of distribution, but volume has been very light since the cup bottomed. Light volume is a positive sign while a stock consolidates.

In the past three quarters, VRSN has reported earnings growth of 18%, 28%, and 48% as well as sales growth of 13%, 13%, and 13%. While the increasing earnings growth is impressive, the consistently weak sales growth is certainly a concern. Annual earnings are expected to increase 16% in 2013 and 11% in 2014. The stock saw  a decrease in fund ownership in its most recent quarter and is in a very poorly performing industry group.

Dunkin’ Brands Group (DNKN)

DNKN has formed a first stage flat base that is part of a base on base pattern that began in June. The current flat base is five weeks long and 11% deep with a pivot point of 40. The entire base on base pattern contains only four weeks of accumulation compared to seven weeks of distribution.

In its most recent three quarters, DNKN has reported earnings growth of 57%, 42%, and 13% as well as sales growth of 10%, 5%, and -4%. The decreasing trend for both sets of number is obviously concerning. The company projects earnings to increase 20% in 2013 and 17% in 2014. It has increased fund ownership over the past four quarters. It also has a strong return on equity of 27% and its industry group is just outside of the range we target.