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W.W. Grainger (GWW) Marked As A Barbarian At The Gate

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 W.W. Grainger ( GWW) 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 W.W. Grainger as such a stock due to the following factors:

  • GWW has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $72.1 million.
  • GWW has traded 123,260 shares today.
  • GWW traded in a range 200.4% of the normal price range with a price range of $6.26.
  • GWW traded above its daily resistance level (quality: 55 days, meaning that the stock is crossing a resistance level set by the last 55 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 GWW:

W.W. Grainger, Inc. distributes maintenance, repair, and operating supplies, as well as other related products and services for businesses and institutions primarily in the United States and Canada. The stock currently has a dividend yield of 1.5%. GWW has a PE ratio of 22.9. Currently there are 7 analysts that rate W.W. Grainger a buy, no analysts rate it a sell, and 8 rate it a hold.

The average volume for W.W. Grainger has been 364,600 shares per day over the past 30 days. W.W. Grainger has a market cap of $17.6 billion and is part of the services sector and wholesale industry. The stock has a beta of 0.84 and a short float of 2.2% with 4.75 days to cover. Shares are down 0.4% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates W.W. Grainger as a buy. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, impressive record of earnings per share growth, compelling growth in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. 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 a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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.
  • GRAINGER (W W) INC has improved earnings per share by 37.2% 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, GRAINGER (W W) INC increased its bottom line by earning $9.52 versus $9.07 in the prior year. This year, the market expects an improvement in earnings ($11.54 versus $9.52).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Trading Companies & Distributors industry average. The net income increased by 35.6% when compared to the same quarter one year prior, rising from $155.39 million to $210.79 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 5.8%. Since the same quarter one year prior, revenues slightly increased by 5.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • GWW's debt-to-equity ratio is very low at 0.17 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, GWW has a quick ratio of 1.51, which demonstrates the ability of the company to cover short-term liquidity needs.

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