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

  • TXT has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $59.5 million.
  • TXT has traded 1.9 million shares today.
  • TXT traded in a range 250.1% of the normal price range with a price range of $1.48.
  • TXT traded above its daily resistance level (quality: 22 days, meaning that the stock is crossing a resistance level set by the last 22 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 TXT:

Textron Inc. operates in the aircraft, defense, industrial, and finance businesses worldwide. It operates in five segments: Cessna, Bell, Textron Systems, Industrial, and Finance. The stock currently has a dividend yield of 0.3%. TXT has a PE ratio of 15.9. Currently there are 7 analysts that rate Textron a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Textron has been 2.4 million shares per day over the past 30 days. Textron has a market cap of $7.9 billion and is part of the industrial goods sector and aerospace/defense industry. The stock has a beta of 1.50 and a short float of 3.1% with 3.50 days to cover. Shares are up 14.1% 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 Textron as a buy. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, notable return on equity, increase in stock price during the past year and largely solid financial position with reasonable debt levels by most measures. 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 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 Aerospace & Defense industry and the overall market on the basis of return on equity, TEXTRON INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • 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. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • TEXTRON INC's earnings per share declined by 31.0% 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, TEXTRON INC increased its bottom line by earning $1.97 versus $0.78 in the prior year. This year, the market expects an improvement in earnings ($2.00 versus $1.97).
  • TXT, with its decline in revenue, underperformed when compared the industry average of 8.6%. Since the same quarter one year prior, revenues slightly dropped by 6.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

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