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Watch Out: Barbarians At The Gate For Windstream Holdings (WIN)

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 Windstream Holdings ( WIN) 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 Windstream Holdings as such a stock due to the following factors:

  • WIN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $83.0 million.
  • WIN has traded 16.6 million shares today.
  • WIN traded in a range 371% of the normal price range with a price range of $0.53.
  • WIN traded above its daily resistance level (quality: 313 days, meaning that the stock is crossing a resistance level set by the last 313 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 WIN with the Ticky from Trade-Ideas. See the FREE profile for WIN NOW at Trade-Ideas

More details on WIN:

Windstream Holdings, Inc. provides communications and technology solutions in the United States. The company offers managed services and cloud computing services to businesses, as well as broadband, voice, and video services to consumers primarily in rural markets. The stock currently has a dividend yield of 11.9%. WIN has a PE ratio of 21.5. Currently there is 1 analyst that rates Windstream Holdings a buy, 4 analysts rate it a sell, and 6 rate it a hold.

The average volume for Windstream Holdings has been 8.0 million shares per day over the past 30 days. Windstream has a market cap of $5.0 billion and is part of the technology sector and telecommunications industry. The stock has a beta of 0.97 and a short float of 15.6% with 9.91 days to cover. Shares are up 3.3% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Windstream Holdings as a buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, notable return on equity, expanding profit margins and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Diversified Telecommunication Services industry. The net income increased by 1084.0% when compared to the same quarter one year prior, rising from $10.00 million to $118.40 million.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Diversified Telecommunication Services industry and the overall market, WINDSTREAM HOLDINGS INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for WINDSTREAM HOLDINGS INC is rather high; currently it is at 59.42%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 7.93% trails the industry average.
  • WINDSTREAM HOLDINGS 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 two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, WINDSTREAM HOLDINGS INC increased its bottom line by earning $0.39 versus $0.29 in the prior year. For the next year, the market is expecting a contraction of 2.6% in earnings ($0.38 versus $0.39).
  • WIN, with its decline in revenue, slightly underperformed the industry average of 1.2%. Since the same quarter one year prior, revenues slightly dropped by 3.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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