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Trade-Ideas: Wells Fargo (WFC) 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 Wells Fargo (WFC) 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 Wells Fargo as such a stock due to the following factors:

  • WFC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $688.9 million.
  • WFC has traded 2.5 million shares today.
  • WFC traded in a range 206.7% of the normal price range with a price range of $0.89.
  • WFC traded above its daily resistance level (quality: 1 day, meaning that the stock is crossing a resistance level set by the last 1 calendar day. 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 WFC:

Wells Fargo & Company provides retail, commercial, and corporate banking services. The stock currently has a dividend yield of 2.8%. WFC has a PE ratio of 11.2. Currently there are 10 analysts that rate Wells Fargo a buy, 1 analyst rates it a sell, and 13 rate it a hold.

The average volume for Wells Fargo has been 17.2 million shares per day over the past 30 days. Wells Fargo has a market cap of $225.3 billion and is part of the financial sector and banking industry. The stock has a beta of 0.96 and a short float of 0.6% with 2.00 days to cover. Shares are up 24.2% year to date as of the close of trading on Thursday.

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 Wells Fargo as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, increase in net income, expanding profit margins and notable return on equity. 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:

  • Compared to where it was 12 months ago, this stock has enjoyed a nice rise of 26.71% which was in line with the performance of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, WFC should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • WELLS FARGO & CO has improved earnings per share by 12.5% 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, WELLS FARGO & CO increased its bottom line by earning $3.36 versus $2.82 in the prior year. This year, the market expects an improvement in earnings ($3.87 versus $3.36).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the Commercial Banks industry average, but is less than that of the S&P 500. The net income increased by 13.0% when compared to the same quarter one year prior, going from $4,937.00 million to $5,578.00 million.
  • The gross profit margin for WELLS FARGO & CO is currently very high, coming in at 94.87%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 25.93% significantly outperformed against the industry average.
  • 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 Commercial Banks industry and the overall market on the basis of return on equity, WELLS FARGO & CO has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.

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