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Trade-Ideas: Carter's (CRI) 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 Carter's ( CRI) 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 Carter's as such a stock due to the following factors:

  • CRI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $35.1 million.
  • CRI has traded 827,566 shares today.
  • CRI traded in a range 255.4% of the normal price range with a price range of $2.89.
  • CRI traded above its daily resistance level (quality: 45 days, meaning that the stock is crossing a resistance level set by the last 45 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 CRI with the Ticky from Trade-Ideas. See the FREE profile for CRI NOW at Trade-Ideas

More details on CRI:

Carter's, Inc., together with its subsidiaries, designs, sources, and markets branded children's wear. The company provides its products under the Carter's, Child of Mine, Just One You, Precious Firsts, OshKosh, and other brands. The stock currently has a dividend yield of 0.9%. CRI has a PE ratio of 25.1. Currently there are 3 analysts that rate Carter's a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Carter's has been 526,600 shares per day over the past 30 days. Carter's has a market cap of $4.2 billion and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 0.85 and a short float of 2.7% with 3.37 days to cover. Shares are up 27.6% year to date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Carter's as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • CRI's revenue growth has slightly outpaced the industry average of 5.1%. Since the same quarter one year prior, revenues slightly increased by 9.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • CRI's debt-to-equity ratio is very low at 0.18 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, CRI has a quick ratio of 1.63, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has significantly increased by 122.91% to $16.71 million when compared to the same quarter last year. In addition, CARTER'S INC has also vastly surpassed the industry average cash flow growth rate of 18.04%.
  • 45.93% is the gross profit margin for CARTER'S INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 3.74% trails the industry average.
  • 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 Textiles, Apparel & Luxury Goods industry and the overall market on the basis of return on equity, CARTER'S INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.

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