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Trade-Ideas: Sears Holdings Corporation (SHLD) 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 Sears Holdings Corporation (SHLD) 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 Sears Holdings Corporation as such a stock due to the following factors:

  • SHLD has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $54.4 million.
  • SHLD has traded 1.1 million shares today.
  • SHLD traded in a range 201% of the normal price range with a price range of $4.38.
  • SHLD traded above its daily resistance level (quality: 108 days, meaning that the stock is crossing a resistance level set by the last 108 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 SHLD:

Sears Holdings Corporation operates as a specialty retailer in the United States and Canada. The company's Kmart segment operates stores that sell merchandise under Jaclyn Smith and Joe Boxer labels; and Sears brand products, such as Kenmore, Craftsman, and DieHard. Currently there are no analysts that rate Sears Holdings Corporation a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Sears Holdings Corporation has been 880,500 shares per day over the past 30 days. Sears has a market cap of $5.1 billion and is part of the services sector and retail industry. The stock has a beta of 2.75 and a short float of 62.3% with 14.88 days to cover. Shares are up 16% year to date as of the close of trading on Friday.

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 Sears Holdings Corporation as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, generally high debt management risk, disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:

  • 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 Multiline Retail industry. The net income has significantly decreased by 47.0% when compared to the same quarter one year ago, falling from -$132.00 million to -$194.00 million.
  • Currently the debt-to-equity ratio of 1.59 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with this, the company manages to maintain a quick ratio of 0.15, which clearly demonstrates the inability to cover short-term cash needs.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Multiline Retail industry and the overall market, SEARS HOLDINGS CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for SEARS HOLDINGS CORP is rather low; currently it is at 24.64%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -2.18% trails that of the industry average.
  • The share price of SEARS HOLDINGS CORP has not done very well: it is down 7.97% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.

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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