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

  • CA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $67.8 million.
  • CA has traded 1.6 million shares today.
  • CA traded in a range 202.2% of the normal price range with a price range of $0.97.
  • CA traded above its daily resistance level (quality: 11 days, meaning that the stock is crossing a resistance level set by the last 11 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 CA:

CA Technologies, together with its subsidiaries, provides enterprise information technology (IT) management software and solutions that help customers manage and secure IT environments in the United States and internationally. The stock currently has a dividend yield of 3.3%. CA has a PE ratio of 13.2. Currently there are 2 analysts that rate CA a buy, 1 analyst rates it a sell, and 7 rate it a hold.

The average volume for CA has been 2.7 million shares per day over the past 30 days. CA has a market cap of $13.8 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 1.36 and a short float of 1.9% with 2.78 days to cover. Shares are up 37.7% year to date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates CA as a buy. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, impressive record of earnings per share growth, notable return on equity, attractive valuation levels and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:

  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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.
  • CA INC has improved earnings per share by 43.1% 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, CA INC increased its bottom line by earning $2.07 versus $1.91 in the prior year. This year, the market expects an improvement in earnings ($2.99 versus $2.07).
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Software industry and the overall market, CA INC's return on equity exceeds that of both the industry average and the S&P 500.
  • CA's debt-to-equity ratio is very low at 0.23 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.97 is somewhat weak and could be cause for future problems.

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