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Watch Out: Barbarians At The Gate For Pier 1 Imports (PIR)

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 Pier 1 Imports ( PIR) 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 Pier 1 Imports as such a stock due to the following factors:

  • PIR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $29.3 million.
  • PIR has traded 204,260 shares today.
  • PIR traded in a range 316.1% of the normal price range with a price range of $1.45.
  • PIR traded above its daily resistance level (quality: 8 days, meaning that the stock is crossing a resistance level set by the last 8 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 PIR with the Ticky from Trade-Ideas. See the FREE profile for PIR NOW at Trade-Ideas

More details on PIR:

Pier 1 Imports, Inc. operates as an importer and specialty retailer of imported decorative home furnishings and gifts. The company is also involved in e-commerce business. The stock currently has a dividend yield of 1%. PIR has a PE ratio of 18.0. Currently there are 10 analysts that rate Pier 1 Imports a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Pier 1 Imports has been 1.5 million shares per day over the past 30 days. Pier 1 Imports has a market cap of $2.2 billion and is part of the services sector and retail industry. The stock has a beta of 1.40 and a short float of 6.5% with 4.45 days to cover. Shares are up 3.8% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Pier 1 Imports 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, increase in stock price during the past year, 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:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.3%. Since the same quarter one year prior, revenues slightly increased by 7.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • PIR's debt-to-equity ratio is very low at 0.02 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that PIR's debt-to-equity ratio is low, the quick ratio, which is currently 0.56, displays a potential problem in covering short-term cash needs.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • 40.77% is the gross profit margin for PIER 1 IMPORTS INC/DE which we consider to be strong. Regardless of PIR'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 4.50% trails the industry average.
  • PIER 1 IMPORTS INC/DE's earnings per share declined by 29.2% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, PIER 1 IMPORTS INC/DE reported lower earnings of $1.20 versus $1.51 in the prior year. This year, the market expects an improvement in earnings ($1.25 versus $1.20).

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