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Trade-Ideas: W.W. Grainger (GWW) 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 W.W. Grainger ( GWW) 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 W.W. Grainger as such a stock due to the following factors:

  • GWW has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $113.1 million.
  • GWW has traded 420,788 shares today.
  • GWW traded in a range 235.2% of the normal price range with a price range of $9.94.
  • GWW 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.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in GWW with the Ticky from Trade-Ideas. See the FREE profile for GWW NOW at Trade-Ideas

More details on GWW:

W.W. Grainger, Inc. engages in the distribution of maintenance, repair, and operating supplies, as well as other related products and services for businesses and institutions primarily in the United States and Canada. The stock currently has a dividend yield of 1.4%. GWW has a PE ratio of 26.1. Currently there are 8 analysts that rate W.W. Grainger a buy, no analysts rate it a sell, and 8 rate it a hold.

The average volume for W.W. Grainger has been 278,300 shares per day over the past 30 days. W.W. Grainger has a market cap of $18.6 billion and is part of the services sector and wholesale industry. The stock has a beta of 0.88 and a short float of 2.9% with 4.00 days to cover. Shares are up 32.6% 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 W.W. Grainger as a buy. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and good cash flow from operations. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:

  • GRAINGER (W W) INC has improved earnings per share by 15.2% 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, GRAINGER (W W) INC increased its bottom line by earning $9.52 versus $9.07 in the prior year. This year, the market expects an improvement in earnings ($11.80 versus $9.52).
  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.3%. Since the same quarter one year prior, revenues slightly increased by 5.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • GWW's debt-to-equity ratio is very low at 0.17 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, GWW has a quick ratio of 1.59, which demonstrates the ability of the company to cover short-term liquidity needs.
  • 45.72% is the gross profit margin for GRAINGER (W W) INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 9.13% is above that of the industry average.
  • Net operating cash flow has significantly increased by 59.42% to $210.41 million when compared to the same quarter last year. Despite an increase in cash flow, GRAINGER (W W) INC's average is still marginally south of the industry average growth rate of 68.14%.

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