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Storm The Castle Stock Of The Day: TIBCO Software (TIBX)

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 TIBCO Software ( TIBX) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified TIBCO Software as such a stock due to the following factors:

  • TIBX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $74.7 million.
  • TIBX has traded 4.8 million shares today.
  • TIBX is trading at 2.76 times the normal volume for the stock at this time of day.
  • TIBX crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on TIBX:

TIBCO Software Inc. provides middleware and infrastructure software worldwide. It offers products in the areas of service-oriented architecture (SOA) and core infrastructure; business optimization; and process automation and collaboration. TIBX has a PE ratio of 20.9. Currently there are 8 analysts that rate TIBCO Software a buy, no analysts rate it a sell, and 8 rate it a hold.

The average volume for TIBCO Software has been 2.5 million shares per day over the past 30 days. TIBCO Software has a market cap of $3.6 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 1.95 and a short float of 1.8% with 0.77 days to cover. Shares are down 0.8% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates TIBCO Software 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 and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:

  • TIBX's revenue growth has slightly outpaced the industry average of 4.9%. Since the same quarter one year prior, revenues slightly increased by 6.4%. 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.
  • Despite currently having a low debt-to-equity ratio of 0.57, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that TIBX's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.29 is high and demonstrates strong liquidity.
  • TIBCO SOFTWARE INC's earnings per share declined by 6.9% 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 two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, TIBCO SOFTWARE INC reported lower earnings of $0.51 versus $0.72 in the prior year. This year, the market expects an improvement in earnings ($1.16 versus $0.51).
  • The gross profit margin for TIBCO SOFTWARE INC is currently very high, coming in at 77.13%. Regardless of TIBX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TIBX's net profit margin of 14.12% is significantly lower than the industry average.
  • Net operating cash flow has decreased to $59.62 million or 17.25% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

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