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Trade-Ideas: Rue21 (RUE) 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 rue21 (RUE) 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 rue21 as such a stock due to the following factors:

  • RUE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $44.6 million.
  • RUE has traded 244,209 shares today.
  • RUE traded in a range 359.5% of the normal price range with a price range of $2.08.
  • RUE traded above its daily resistance level (quality: 9 days, meaning that the stock is crossing a resistance level set by the last 9 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 RUE:

rue21, Inc. operates as a specialty retailer of junior girls and young men's apparel and accessories in the United States. RUE has a PE ratio of 28.7. Currently there is 1 analyst that rates rue21 a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for rue21 has been 428,700 shares per day over the past 30 days. Rue21 has a market cap of $958.4 million and is part of the services sector and retail industry. The stock has a beta of 1.79 and a short float of 22.3% with 3.15 days to cover. Shares are up 43.6% 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 rue21 as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, solid stock price performance and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 19.7%. Since the same quarter one year prior, revenues rose by 13.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has significantly increased by 409.38% to $12.22 million when compared to the same quarter last year. In addition, RUE21 INC has also vastly surpassed the industry average cash flow growth rate of 13.91%.
  • Compared to its closing price of one year ago, RUE's share price has jumped by 30.37%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • RUE has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.34 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • RUE21 INC has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, RUE21 INC increased its bottom line by earning $1.77 versus $1.56 in the prior year. For the next year, the market is expecting a contraction of 9.6% in earnings ($1.60 versus $1.77).

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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