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Barbarian At The Gate: Waters Corporation (WAT)

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 Waters Corporation ( WAT) 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 Waters Corporation as such a stock due to the following factors:

  • WAT has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $52.9 million.
  • WAT has traded 232,321 shares today.
  • WAT traded in a range 204.5% of the normal price range with a price range of $2.39.
  • WAT traded above its daily resistance level (quality: 77 days, meaning that the stock is crossing a resistance level set by the last 77 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 WAT:

Waters Corporation operates as an analytical instrument manufacturer in the United States and internationally. WAT has a PE ratio of 18.2. Currently there are 4 analysts that rate Waters Corporation a buy, no analysts rate it a sell, and 10 rate it a hold.

The average volume for Waters Corporation has been 465,300 shares per day over the past 30 days. Waters has a market cap of $8.6 billion and is part of the technology sector and electronics industry. The stock has a beta of 0.87 and a short float of 3.8% with 5.38 days to cover. Shares are up 0.5% year-to-date as of the close of trading on Monday.

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 Waters Corporation as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. 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 7.0%. Since the same quarter one year prior, revenues slightly increased by 1.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The gross profit margin for WATERS CORP is rather high; currently it is at 62.06%. Regardless of WAT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, WAT's net profit margin of 21.43% significantly outperformed against the industry.
  • Net operating cash flow has slightly increased to $104.77 million or 3.36% when compared to the same quarter last year. Despite an increase in cash flow, WATERS CORP's average is still marginally south of the industry average growth rate of 9.29%.
  • WAT's debt-to-equity ratio of 0.80 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 4.21 is very high and demonstrates very strong liquidity.
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. 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.

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