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Barbarian At The Gate: Francescas Holdings (FRAN)

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 Francescas Holdings (FRAN) 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 Francescas Holdings as such a stock due to the following factors:

  • FRAN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $21.4 million.
  • FRAN has traded 745,526 shares today.
  • FRAN traded in a range 236.8% of the normal price range with a price range of $1.09.
  • FRAN traded above its daily resistance level (quality: 48 days, meaning that the stock is crossing a resistance level set by the last 48 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 FRAN:

Francesca's Holdings Corporation, through its subsidiary, Francesca's Collections, Inc., operates a chain of retail boutiques. The company offers a selection of fashion apparel, jewelry, accessories, and gifts primarily to its female customers. FRAN has a PE ratio of 15.7. Currently there are 8 analysts that rate Francescas Holdings a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Francescas Holdings has been 1.6 million shares per day over the past 30 days. Francescas has a market cap of $791.0 million and is part of the services sector and retail industry. The stock has a beta of 2.13 and a short float of 24.9% with 7.60 days to cover. Shares are down 30.8% year to date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Francescas Holdings as a sell. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself and weak operating cash flow.

Highlights from the ratings report include:

  • FRAN's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 31.50%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, FRAN is still more expensive than most of the other companies in its industry.
  • Net operating cash flow has decreased to $8.02 million or 33.89% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • 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. Compared to other companies in the Specialty Retail industry and the overall market, FRANCESCAS HOLDINGS CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The company, on the basis of net income growth from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Specialty Retail industry average. The net income increased by 15.5% when compared to the same quarter one year prior, going from $12.65 million to $14.62 million.
  • The gross profit margin for FRANCESCAS HOLDINGS CORP is rather high; currently it is at 56.15%. Regardless of FRAN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, FRAN's net profit margin of 16.32% compares favorably to the industry average.

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