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Watch Out: Barbarians At The Gate For Louisiana-Pacific (LPX)

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 Louisiana-Pacific ( LPX) 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 Louisiana-Pacific as such a stock due to the following factors:

  • LPX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $31.2 million.
  • LPX has traded 1.5 million shares today.
  • LPX traded in a range 243.3% of the normal price range with a price range of $0.95.
  • LPX traded above its daily resistance level (quality: 38 days, meaning that the stock is crossing a resistance level set by the last 38 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 LPX with the Ticky from Trade-Ideas. See the FREE profile for LPX NOW at Trade-Ideas

More details on LPX:

Louisiana-Pacific Corporation, together with its subsidiaries, engages in manufacturing and distributing building products for new home construction, repair and remodeling, manufactured housing, and light industrial and commercial construction. The stock currently has a dividend yield of 6.7%. LPX has a PE ratio of 9.5. Currently there are 7 analysts that rate Louisiana-Pacific a buy, 1 analyst rates it a sell, and 1 rates it a hold.

The average volume for Louisiana-Pacific has been 2.6 million shares per day over the past 30 days. Louisiana-Pacific has a market cap of $2.3 billion and is part of the services sector and wholesale industry. The stock has a beta of 1.66 and a short float of 6.3% with 3.66 days to cover. Shares are down 15.8% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Louisiana-Pacific as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, impressive record of earnings per share growth and compelling growth in net income. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:

  • LPX's revenue growth has slightly outpaced the industry average of 2.4%. Since the same quarter one year prior, revenues slightly increased by 9.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.63, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with this, the company maintains a quick ratio of 4.38, which clearly demonstrates the ability to cover short-term cash needs.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Paper & Forest Products industry and the overall market, LOUISIANA-PACIFIC CORP's return on equity exceeds that of both the industry average and the S&P 500.
  • LOUISIANA-PACIFIC CORP has improved earnings per share by 18.2% 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, LOUISIANA-PACIFIC CORP turned its bottom line around by earning $0.20 versus -$1.29 in the prior year. This year, the market expects an improvement in earnings ($1.02 versus $0.20).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Paper & Forest Products industry average, but is greater than that of the S&P 500. The net income increased by 21.7% when compared to the same quarter one year prior, going from $31.30 million to $38.10 million.

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