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Watch Out: Barbarians At The Gate For Men's Wearhouse (MW)

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 Men's Wearhouse (MW) 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 Men's Wearhouse as such a stock due to the following factors:

  • MW has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $74.6 million.
  • MW has traded 1.8 million shares today.
  • MW traded in a range 283.6% of the normal price range with a price range of $4.09.
  • MW traded above its daily resistance level (quality: 15 days, meaning that the stock is crossing a resistance level set by the last 15 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 MW:

The Men's Wearhouse, Inc., together with its subsidiaries, operates as a specialty apparel retailer in the United States and Canada. It provides suits, suit separates, sport coats, slacks, sportswear, outerwear, dress shirts, shoes, and accessories for men, as well as offers tuxedo rentals. The stock currently has a dividend yield of 1.7%. MW has a PE ratio of 18.0. Currently there is 1 analyst that rates Men's Wearhouse a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Men's Wearhouse has been 1.2 million shares per day over the past 30 days. Men's Wearhouse has a market cap of $2.0 billion and is part of the services sector and retail industry. The stock has a beta of 0.96 and a short float of 6.9% with 2.12 days to cover. Shares are up 37.2% year to date as of the close of trading on Wednesday.

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 Men's Wearhouse as a buy. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, solid stock price performance, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • MW's share price has surged by 29.00% over the past year, reflecting the market's general trend, despite their weak earnings growth during the last quarter. Regarding the stock's future course, although almost any stock can fall in a broad market decline, MW should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The gross profit margin for MENS WEARHOUSE INC is rather high; currently it is at 51.12%. Regardless of MW's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 6.63% trails the industry average.
  • MW, with its decline in revenue, underperformed when compared the industry average of 19.6%. Since the same quarter one year prior, revenues slightly dropped by 2.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 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 Specialty Retail industry and the overall market, MENS WEARHOUSE INC's return on equity is below that of both the industry average and the S&P 500.

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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