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Barbarian At The Gate: SodaStream International (SODA)

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 SodaStream International ( SODA) 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 SodaStream International as such a stock due to the following factors:

  • SODA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $48.1 million.
  • SODA has traded 935,522 shares today.
  • SODA traded in a range 221.4% of the normal price range with a price range of $3.77.
  • SODA traded above its daily resistance level (quality: 20 days, meaning that the stock is crossing a resistance level set by the last 20 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 SODA:

SodaStream International Ltd. engages in the development, manufacture, and sale of home beverage carbonation systems that enable consumers to transform ordinary tap water instantly into carbonated soft drinks and sparkling water. SODA has a PE ratio of 21.0. Currently there is 1 analyst that rates SodaStream International a buy, 1 analyst rates it a sell, and 8 rate it a hold.

The average volume for SodaStream International has been 1.6 million shares per day over the past 30 days. SodaStream International has a market cap of $848.2 million and is part of the consumer goods sector and food & beverage industry. The stock has a beta of 1.37 and a short float of 47.5% with 6.86 days to cover. Shares are down 18.6% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates SodaStream International as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 27.9%. Since the same quarter one year prior, revenues rose by 26.4%. 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.
  • SODA's debt-to-equity ratio is very low at 0.05 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.12, which illustrates the ability to avoid short-term cash problems.
  • 45.18% is the gross profit margin for SODASTREAM INTERNATIONAL LTD which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 0.40% trails the industry average.
  • Net operating cash flow has declined marginally to $20.44 million or 8.63% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The share price of SODASTREAM INTERNATIONAL LTD has not done very well: it is down 22.68% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.

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