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Trade-Ideas: Veeco Instruments (VECO) 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 Veeco Instruments (VECO) 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 Veeco Instruments as such a stock due to the following factors:

  • VECO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $27.9 million.
  • VECO has traded 1.3 million shares today.
  • VECO traded in a range 246.3% of the normal price range with a price range of $3.12.
  • VECO traded above its daily resistance level (quality: 17 days, meaning that the stock is crossing a resistance level set by the last 17 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 VECO:

Veeco Instruments Inc., together with its subsidiaries, designs, manufactures, and markets various equipments to make light emitting diodes (LEDs) and hard-disk drives worldwide. VECO has a PE ratio of 11.2. Currently there are 3 analysts that rate Veeco Instruments a buy, no analysts rate it a sell, and 10 rate it a hold.

The average volume for Veeco Instruments has been 429,400 shares per day over the past 30 days. Veeco Instruments has a market cap of $1.2 billion and is part of the technology sector and electronics industry. Shares are up 1.3% year to date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Veeco Instruments as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:

  • VECO's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 4.83, which clearly demonstrates the ability to cover short-term cash needs.
  • 41.40% is the gross profit margin for VEECO INSTRUMENTS INC which we consider to be strong. Regardless of VECO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, VECO's net profit margin of 10.60% is significantly lower than the industry average.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income has significantly decreased by 62.5% when compared to the same quarter one year ago, falling from $35.86 million to $13.47 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. When compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, VEECO INSTRUMENTS INC's return on equity is below that of both the industry average and the S&P 500.

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