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Watch Out: Barbarians At The Gate For SUPERVALU (SVU)

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 SUPERVALU ( SVU) 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 SUPERVALU as such a stock due to the following factors:

  • SVU has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $26.5 million.
  • SVU has traded 1.1 million shares today.
  • SVU traded in a range 211.7% of the normal price range with a price range of $0.40.
  • SVU traded above its daily resistance level (quality: 176 days, meaning that the stock is crossing a resistance level set by the last 176 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 SVU with the Ticky from Trade-Ideas. See the FREE profile for SVU NOW at Trade-Ideas

More details on SVU:

SUPERVALU INC., together with its subsidiaries, operates as a wholesale distributor to independent retail customers in the United States. It operates in three segments: Retail Food, Save-A-Lot, and Independent Business. Currently there is 1 analyst that rates SUPERVALU a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for SUPERVALU has been 3.6 million shares per day over the past 30 days. SUPERVALU has a market cap of $1.8 billion and is part of the services sector and retail industry. The stock has a beta of 2.49 and a short float of 14% with 7.86 days to cover. Shares are down 7.3% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates SUPERVALU as a sell. Among the areas we feel are negative, one of the most important has been poor profit margins.

Highlights from the ratings report include:

  • The gross profit margin for SUPERVALU INC is currently extremely low, coming in at 14.18%. Regardless of SVU's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 0.77% trails the industry average.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 6.4%. Since the same quarter one year prior, revenues slightly dropped by 1.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • Net operating cash flow has increased to -$42.00 million or 27.58% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -7.13%.
  • This stock has increased by 32.11% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the future course of this stock, we feel that the risks involved in investing in SVU do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.
  • SUPERVALU 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. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, SUPERVALU INC continued to lose money by earning -$1.23 versus -$4.91 in the prior year. This year, the market expects an improvement in earnings ($0.55 versus -$1.23).

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