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Trade-Ideas: Sociedad Quimica Y Minera De Chile (SQM) 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 Sociedad Quimica Y Minera De Chile ( SQM) 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 Sociedad Quimica Y Minera De Chile as such a stock due to the following factors:

  • SQM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $35.6 million.
  • SQM has traded 1.2 million shares today.
  • SQM traded in a range 235.6% of the normal price range with a price range of $1.75.
  • SQM traded above its daily resistance level (quality: 22 days, meaning that the stock is crossing a resistance level set by the last 22 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 SQM with the Ticky from Trade-Ideas. See the FREE profile for SQM NOW at Trade-Ideas

More details on SQM:

Chemical and Mining Company of Chile Inc. engages in the production and distribution of specialty plant nutrients, iodine and its derivatives, lithium and its derivatives, potassium chloride and potassium sulfate, industrial chemicals, and other commodity fertilizers. The stock currently has a dividend yield of 3.8%. SQM has a PE ratio of 10.7. Currently there is 1 analyst that rates Sociedad Quimica Y Minera De Chile a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for Sociedad Quimica Y Minera De Chile has been 1.1 million shares per day over the past 30 days. Sociedad Quimica Y Minera De Chile has a market cap of $6.9 billion and is part of the basic materials sector and chemicals industry. Shares are down 53.2% year to date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Sociedad Quimica Y Minera De Chile as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.

Highlights from the ratings report include:

  • The debt-to-equity ratio is somewhat low, currently at 0.64, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, SQM has a quick ratio of 2.08, which demonstrates the ability of the company to cover short-term liquidity needs.
  • 42.47% is the gross profit margin for SOC QUIMICA Y MINERA DE CHI which we consider to be strong. Regardless of SQM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SQM's net profit margin of 18.95% compares favorably to the industry average.
  • SQM, with its decline in revenue, underperformed when compared the industry average of 2.8%. Since the same quarter one year prior, revenues fell by 17.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 58.41%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 43.83% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • 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 Chemicals industry. The net income has significantly decreased by 44.1% when compared to the same quarter one year ago, falling from $192.21 million to $107.40 million.

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