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Prosperity (PB) 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 Prosperity (PB) 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 Prosperity as such a stock due to the following factors:

  • PB has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $21.6 million.
  • PB has traded 76,070 shares today.
  • PB traded in a range 250.5% of the normal price range with a price range of $2.09.
  • PB traded above its daily resistance level (quality: 48 days, meaning that the stock is crossing a resistance level set by the last 48 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 PB:

Prosperity Bancshares, Inc. operates as the holding company for Prosperity Bank that provides a range of financial products and services to small and medium-sized businesses, and consumers in Texas. The stock currently has a dividend yield of 1.5%. PB has a PE ratio of 17.8. Currently there is 1 analyst that rates Prosperity a buy, no analysts rate it a sell, and 12 rate it a hold.

The average volume for Prosperity has been 342,600 shares per day over the past 30 days. Prosperity has a market cap of $4.1 billion and is part of the financial sector and banking industry. The stock has a beta of 1.48 and a short float of 6.1% with 9.59 days to cover. Shares are down 2.4% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Prosperity as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, expanding profit margins, solid stock price performance and compelling growth in net income. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 1.2%. Since the same quarter one year prior, revenues rose by 11.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • PROSPERITY BANCSHARES INC has improved earnings per share by 11.0% 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, PROSPERITY BANCSHARES INC increased its bottom line by earning $3.22 versus $3.01 in the prior year. This year, the market expects an improvement in earnings ($3.58 versus $3.22).
  • The gross profit margin for PROSPERITY BANCSHARES INC is currently very high, coming in at 91.31%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 35.03% is above that of the industry average.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 37.73% over the past year, a rise that has exceeded that of the S&P 500 Index. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Commercial Banks industry average. The net income increased by 19.7% when compared to the same quarter one year prior, going from $46.18 million to $55.28 million.

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