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Trade-Ideas: Companhia De Saneamento Basico Do Estado De (SBS) 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 Companhia De Saneamento Basico Do Estado De ( SBS) 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 Companhia De Saneamento Basico Do Estado De as such a stock due to the following factors:

  • SBS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $22.8 million.
  • SBS has traded 1.6 million shares today.
  • SBS traded in a range 218.7% of the normal price range with a price range of $0.73.
  • SBS traded above its daily resistance level (quality: 35 days, meaning that the stock is crossing a resistance level set by the last 35 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 SBS with the Ticky from Trade-Ideas. See the FREE profile for SBS NOW at Trade-Ideas

More details on SBS:

Companhia de Saneamento Basico do Estado de S o Paulo-SABESP provides basic and environmental sanitation services; and supplies treated water on a wholesale basis to residential, commercial, industrial, and municipal customers in the State of S o Paulo. The stock currently has a dividend yield of 4.5%. SBS has a PE ratio of 6.2. Currently there is 1 analyst that rates Companhia De Saneamento Basico Do Estado De a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Companhia De Saneamento Basico Do Estado De has been 2.0 million shares per day over the past 30 days. Companhia De Saneamento Basico Do Estado De has a market cap of $5.8 billion and is part of the utilities sector and utilities industry. Shares are down 32.3% year to date as of the close of trading on Thursday.

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 Companhia De Saneamento Basico Do Estado De as a buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth and good cash flow from operations. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:

  • CIA SANEAMENTO BASICO ESTADO reported significant earnings per share improvement 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 year. We feel that this trend should continue. During the past fiscal year, CIA SANEAMENTO BASICO ESTADO increased its bottom line by earning $1.37 versus $0.96 in the prior year. This year, the market expects an improvement in earnings ($1.37 versus $1.37).
  • Net operating cash flow has increased to $318.32 million or 35.47% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -2.44%.
  • SBS, with its decline in revenue, slightly underperformed the industry average of 3.6%. Since the same quarter one year prior, revenues slightly dropped by 7.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • SBS's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 44.32%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Looking ahead, the stock's sharp decline over the past year may have been what was needed in order to bring its value into alignment with its fundamentals and others in its industry.

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