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Trade-Ideas: Tesoro Corporation (TSO) 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 Tesoro Corporation ( TSO) 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 Tesoro Corporation as such a stock due to the following factors:

  • TSO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $173.1 million.
  • TSO has traded 1.9 million shares today.
  • TSO traded in a range 213.9% of the normal price range with a price range of $2.63.
  • TSO traded above its daily resistance level (quality: 20 days, meaning that the stock is crossing a resistance level set by the last 20 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 TSO with the Ticky from Trade-Ideas. See the FREE profile for TSO NOW at Trade-Ideas

More details on TSO:

Tesoro Corporation, together with its subsidiaries, engages in refining and marketing petroleum products in the United States. It operates in two segments, Refining and Retail. The stock currently has a dividend yield of 2.2%. TSO has a PE ratio of 9.9. Currently there are 9 analysts that rate Tesoro Corporation a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Tesoro Corporation has been 3.2 million shares per day over the past 30 days. Tesoro has a market cap of $6.1 billion and is part of the basic materials sector and energy industry. The stock has a beta of 2.21 and a short float of 5.3% with 1.95 days to cover. Shares are up 2.4% year to date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Tesoro Corporation as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 6.6%. Since the same quarter one year prior, revenues rose by 21.1%. 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.
  • In its most recent trading session, TSO has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • TESORO CORP's earnings per share declined by 33.3% in the most recent quarter compared to 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, TESORO CORP increased its bottom line by earning $5.18 versus $3.76 in the prior year. For the next year, the market is expecting a contraction of 27.4% in earnings ($3.76 versus $5.18).
  • TSO's debt-to-equity ratio of 0.76 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. Despite the fact that TSO's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.66 is low and demonstrates weak liquidity.

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