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Trade-Ideas: Hewlett-Packard (HPQ) 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 Hewlett-Packard ( HPQ) 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 Hewlett-Packard as such a stock due to the following factors:

  • HPQ has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $284.0 million.
  • HPQ has traded 13.5 million shares today.
  • HPQ traded in a range 238.6% of the normal price range with a price range of $1.09.
  • HPQ traded above its daily resistance level (quality: 6 days, meaning that the stock is crossing a resistance level set by the last 6 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 HPQ:

Hewlett-Packard Company and its subsidiaries provide products, technologies, software, solutions, and services to individual consumers, small-and medium-sized businesses (SMBs), and large enterprises, including customers in the government, health, and education sectors worldwide. The stock currently has a dividend yield of 2.7%. Currently there are 3 analysts that rate Hewlett-Packard a buy, 5 analysts rate it a sell, and 13 rate it a hold.

The average volume for Hewlett-Packard has been 15.1 million shares per day over the past 30 days. Hewlett-Packard has a market cap of $40.8 billion and is part of the technology sector and computer hardware industry. The stock has a beta of 1.64 and a short float of 2.4% with 3.49 days to cover. Shares are up 49.1% 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 Hewlett-Packard as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, compelling growth in net income and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, poor profit margins and weak operating cash flow.

Highlights from the ratings report include:

  • Powered by its strong earnings growth of 115.81% and other important driving factors, this stock has surged by 40.30% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Computers & Peripherals industry. The net income increased by 115.7% when compared to the same quarter one year prior, rising from -$8,857.00 million to $1,390.00 million.
  • HEWLETT-PACKARD CO reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. 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, HEWLETT-PACKARD CO swung to a loss, reporting -$6.45 versus $3.27 in the prior year. This year, the market expects an improvement in earnings ($3.55 versus -$6.45).
  • The gross profit margin for HEWLETT-PACKARD CO is currently lower than what is desirable, coming in at 26.33%. Regardless of HPQ's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, HPQ's net profit margin of 5.10% is significantly lower than the industry average.
  • The debt-to-equity ratio of 1.01 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, HPQ has a quick ratio of 0.67, this demonstrates the lack of ability of the company to cover short-term liquidity needs.

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