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Trade-Ideas: MRC Global (MRC) 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 MRC Global ( MRC) 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 MRC Global as such a stock due to the following factors:

  • MRC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $20.9 million.
  • MRC has traded 779,660 shares today.
  • MRC traded in a range 245.3% of the normal price range with a price range of $1.16.
  • MRC traded above its daily resistance level (quality: 69 days, meaning that the stock is crossing a resistance level set by the last 69 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 MRC:

MRC Global Inc. distributes pipes, valves, and fittings (PVF), and related products and services to the energy industry worldwide. MRC has a PE ratio of 19.7. Currently there are 8 analysts that rate MRC Global a buy, 1 analyst rates it a sell, and 2 rate it a hold.

The average volume for MRC Global has been 975,100 shares per day over the past 30 days. MRC Global has a market cap of $2.7 billion and is part of the industrial goods sector and industrial industry. Shares are down 4.4% year to date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates MRC Global as a hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and reasonable valuation levels. However, as a counter to these strengths, we find that the company's profit margins have been poor overall.

Highlights from the ratings report include:

  • MRC GLOBAL INC has improved earnings per share by 34.4% 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. This trend suggests that the performance of the business is improving. During the past fiscal year, MRC GLOBAL INC increased its bottom line by earning $1.24 versus $0.31 in the prior year. This year, the market expects an improvement in earnings ($1.75 versus $1.24).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Trading Companies & Distributors industry. The net income increased by 40.0% when compared to the same quarter one year prior, rising from $31.33 million to $43.85 million.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • MRC's debt-to-equity ratio of 0.86 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.23 is sturdy.
  • The gross profit margin for MRC GLOBAL INC is rather low; currently it is at 20.70%. Regardless of MRC's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 3.45% trails the industry average.

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