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Watch Out: Barbarians At The Gate For Telephone And Data Systems (TDS)

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 Telephone and Data Systems ( TDS) 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 Telephone and Data Systems as such a stock due to the following factors:

  • TDS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $20.7 million.
  • TDS has traded 214,832 shares today.
  • TDS traded in a range 244.6% of the normal price range with a price range of $1.83.
  • TDS traded above its daily resistance level (quality: 12 days, meaning that the stock is crossing a resistance level set by the last 12 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 TDS with the Ticky from Trade-Ideas. See the FREE profile for TDS NOW at Trade-Ideas

More details on TDS:

Telephone and Data Systems, Inc., a diversified telecommunications service company, provides wireless and wireline telecommunications services in the United States. The stock currently has a dividend yield of 2.3%. TDS has a PE ratio of 18.1. Currently there are 3 analysts that rate Telephone and Data Systems a buy, 1 analyst rates it a sell, and 1 rates it a hold.

The average volume for Telephone and Data Systems has been 735,300 shares per day over the past 30 days. Telephone and Data Systems has a market cap of $2.4 billion and is part of the technology sector and telecommunications industry. The stock has a beta of 1.11 and a short float of 1% with 1.71 days to cover. Shares are down 11.6% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Telephone and Data Systems as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and impressive record of earnings per share growth. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall.

Highlights from the ratings report include:

  • The current debt-to-equity ratio, 0.42, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.35, which illustrates the ability to avoid short-term cash problems.
  • TELEPHONE & DATA SYSTEMS INC reported significant earnings per share improvement 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 year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, TELEPHONE & DATA SYSTEMS INC increased its bottom line by earning $1.28 versus $0.75 in the prior year. For the next year, the market is expecting a contraction of 127.0% in earnings (-$0.35 versus $1.28).
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Wireless Telecommunication Services industry and the overall market on the basis of return on equity, TELEPHONE & DATA SYSTEMS INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • Net operating cash flow has significantly decreased to $56.71 million or 83.54% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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