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Trade-Ideas: XL Group (XL) 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 XL Group ( XL) 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 XL Group as such a stock due to the following factors:

  • XL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $58.4 million.
  • XL has traded 553,305 shares today.
  • XL traded in a range 215.6% of the normal price range with a price range of $0.76.
  • XL traded above its daily resistance level (quality: 2 days, meaning that the stock is crossing a resistance level set by the last 2 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 XL with the Ticky from Trade-Ideas. See the FREE profile for XL NOW at Trade-Ideas

More details on XL:

XL GROUP Public Limited Company, through its subsidiaries, provides insurance and reinsurance coverages to industrial, commercial, and professional firms, as well as insurance companies and other enterprises worldwide. The stock currently has a dividend yield of 1.8%. XL has a PE ratio of 10.5. Currently there are 9 analysts that rate XL Group a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for XL Group has been 1.7 million shares per day over the past 30 days. XL Group has a market cap of $8.8 billion and is part of the financial sector and insurance industry. The stock has a beta of 1.35 and a short float of 1.6% with 2.68 days to cover. Shares are up 23.1% 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 XL Group 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, solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 7.4%. Since the same quarter one year prior, revenues slightly increased by 5.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • XL's debt-to-equity ratio is very low at 0.17 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
  • Powered by its strong earnings growth of 30.98% and other important driving factors, this stock has surged by 29.12% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, XL should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • XL GROUP PLC has improved earnings per share by 31.0% 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 two years. We feel that this trend should continue. During the past fiscal year, XL GROUP PLC turned its bottom line around by earning $2.10 versus -$1.52 in the prior year. This year, the market expects an improvement in earnings ($2.95 versus $2.10).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Insurance industry average. The net income increased by 23.3% when compared to the same quarter one year prior, going from $221.15 million to $272.70 million.

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