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Trade-Ideas: Walt Disney (DIS) 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 Walt Disney ( DIS) 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 Walt Disney as such a stock due to the following factors:

  • DIS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $521.4 million.
  • DIS has traded 3.7 million shares today.
  • DIS traded in a range 272.3% of the normal price range with a price range of $2.37.
  • DIS traded above its daily resistance level (quality: 34 days, meaning that the stock is crossing a resistance level set by the last 34 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 DIS:

The Walt Disney Company operates as an entertainment company worldwide. Its Media Networks segment engages in broadcast television network, television production and distribution, television stations, broadcast radio networks and stations, and publishing and digital operations. The stock currently has a dividend yield of 1.2%. DIS has a PE ratio of 19.0. Currently there are 15 analysts that rate Walt Disney a buy, no analysts rate it a sell, and 8 rate it a hold.

The average volume for Walt Disney has been 7.1 million shares per day over the past 30 days. Walt Disney has a market cap of $112.2 billion and is part of the services sector and media industry. The stock has a beta of 1.09 and a short float of 2% with 4.49 days to cover. Shares are up 26.2% year to date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

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

Highlights from the ratings report include:

  • DIS's revenue growth has slightly outpaced the industry average of 0.5%. Since the same quarter one year prior, revenues slightly increased by 4.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • Net operating cash flow has increased to $3,413.00 million or 18.30% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -15.99%.
  • DISNEY (WALT) CO reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, DISNEY (WALT) CO increased its bottom line by earning $3.12 versus $2.52 in the prior year. This year, the market expects an improvement in earnings ($3.38 versus $3.12).
  • The current debt-to-equity ratio, 0.34, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.93 is somewhat weak and could be cause for future problems.
  • 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. In comparison to the other companies in the Media industry and the overall market, DISNEY (WALT) CO's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.

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