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Trade-Ideas: Dollar Tree Stores (DLTR) 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 Dollar Tree Stores ( DLTR) 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 Dollar Tree Stores as such a stock due to the following factors:

  • DLTR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $79.5 million.
  • DLTR has traded 2.0 million shares today.
  • DLTR traded in a range 238% of the normal price range with a price range of $2.19.
  • DLTR traded above its daily resistance level (quality: 13 days, meaning that the stock is crossing a resistance level set by the last 13 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.

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More details on DLTR:

Dollar Tree, Inc. operates discount variety stores in the United States and Canada. Its stores offer merchandise at the fixed price of $1.00. DLTR has a PE ratio of 18.4. Currently there are 9 analysts that rate Dollar Tree Stores a buy, no analysts rate it a sell, and 8 rate it a hold.

The average volume for Dollar Tree Stores has been 1.5 million shares per day over the past 30 days. Dollar Tree Stores has a market cap of $11.4 billion and is part of the services sector and retail industry. The stock has a beta of 0.07 and a short float of 1.4% with 1.98 days to cover. Shares are up 28.2% year to date as of the close of trading on Tuesday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Dollar Tree Stores 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, increase in net income, notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:

  • DLTR's revenue growth has slightly outpaced the industry average of 5.2%. Since the same quarter one year prior, revenues slightly increased by 8.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • DOLLAR TREE INC has improved earnings per share by 18.0% 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, DOLLAR TREE INC increased its bottom line by earning $2.70 versus $2.03 in the prior year. This year, the market expects an improvement in earnings ($2.82 versus $2.70).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Multiline Retail industry average. The net income increased by 15.0% when compared to the same quarter one year prior, going from $116.10 million to $133.50 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. Compared to other companies in the Multiline Retail industry and the overall market, DOLLAR TREE INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • 37.58% is the gross profit margin for DOLLAR TREE INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 7.15% is above that of the industry average.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

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