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Trade-Ideas: Corrections Corporation Of America (CXW) Is Today's "Barbarian At The Gate" Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Corrections Corporation of America ( CXW) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Corrections Corporation of America as such a stock due to the following factors:

  • CXW has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $42.7 million.
  • CXW has traded 469,379 shares today.
  • CXW traded in a range 228.2% of the normal price range with a price range of $1.54.
  • CXW traded above 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 'Barbarian at the Gate' 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 positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock s movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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

More details on CXW:

Corrections Corporation of America, together with its subsidiaries, owns and operates privatized correctional and detention facilities in the United States. The stock currently has a dividend yield of 5.8%. CXW has a PE ratio of 12.0. Currently there are 3 analysts that rate Corrections Corporation of America a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Corrections Corporation of America has been 1.4 million shares per day over the past 30 days. Corrections Corporation of America has a market cap of $3.9 billion and is part of the services sector and diversified services industry. The stock has a beta of 0.45 and a short float of 2.8% with 1.97 days to cover. Shares are down 5.9% year to date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Corrections Corporation of America as a buy. The company's strengths can be seen in multiple areas, such as its notable return on equity and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to the other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, CORRECTIONS CORP AMER's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
  • CORRECTIONS CORP AMER's earnings per share declined by 48.6% in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. We anticipate these figures will begin to experience more growth in the coming year. During the past fiscal year, CORRECTIONS CORP AMER increased its bottom line by earning $1.56 versus $1.55 in the prior year. This year, the market expects an improvement in earnings ($1.98 versus $1.56).
  • CXW, with its decline in revenue, underperformed when compared the industry average of 10.6%. Since the same quarter one year prior, revenues slightly dropped by 2.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • In its most recent trading session, CXW has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 45.3% when compared to the same quarter one year ago, falling from $37.33 million to $20.43 million.

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