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Watch Out: Barbarians At The Gate For Dr Pepper Snapple Group (DPS)

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 Dr Pepper Snapple Group ( DPS) 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 Dr Pepper Snapple Group as such a stock due to the following factors:

  • DPS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $67.7 million.
  • DPS has traded 1.2 million shares today.
  • DPS traded in a range 269.4% of the normal price range with a price range of $1.45.
  • DPS traded above its daily resistance level (quality: 70 days, meaning that the stock is crossing a resistance level set by the last 70 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 DPS with the Ticky from Trade-Ideas. See the FREE profile for DPS NOW at Trade-Ideas

More details on DPS:

Dr Pepper Snapple Group, Inc. operates as a brand owner, manufacturer, and distributor of non-alcoholic beverages in the United States, Canada, Mexico, and the Caribbean. The stock currently has a dividend yield of 3.4%. DPS has a PE ratio of 15.5. Currently there are 2 analysts that rate Dr Pepper Snapple Group a buy, 1 analyst rates it a sell, and 8 rate it a hold.

The average volume for Dr Pepper Snapple Group has been 1.1 million shares per day over the past 30 days. Dr Pepper Snapple Group has a market cap of $9.2 billion and is part of the consumer goods sector and food & beverage industry. The stock has a beta of 0.04 and a short float of 4% with 4.98 days to cover. Shares are up 2.5% year to date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Dr Pepper Snapple Group as a buy. The company's strengths can be seen in multiple areas, such as its notable return on equity, reasonable valuation levels, expanding profit margins 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 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. When compared to other companies in the Beverages industry and the overall market, DR PEPPER SNAPPLE GROUP INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • The gross profit margin for DR PEPPER SNAPPLE GROUP INC is rather high; currently it is at 59.40%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, DPS's net profit margin of 9.62% significantly trails the industry average.
  • DR PEPPER SNAPPLE GROUP INC's earnings per share declined by 8.4% 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, DR PEPPER SNAPPLE GROUP INC increased its bottom line by earning $2.96 versus $2.75 in the prior year. This year, the market expects an improvement in earnings ($3.07 versus $2.96).
  • DPS, with its decline in revenue, slightly underperformed the industry average of 1.1%. Since the same quarter one year prior, revenues slightly dropped by 0.6%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.

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