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Trade-Ideas: Avery Dennison (AVY) Is Today's "Barbarian At The Gate" Stock

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 Avery Dennison (AVY) 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 Avery Dennison as such a stock due to the following factors:

  • AVY has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $45.4 million.
  • AVY has traded 1.2 million shares today.
  • AVY traded in a range 210.2% of the normal price range with a price range of $1.62.
  • AVY traded above its daily resistance level (quality: 8 days, meaning that the stock is crossing a resistance level set by the last 8 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 AVY:

Avery Dennison Corporation produces and sells pressure-sensitive materials worldwide. It operates through Pressure-Sensitive Materials, and Retail Branding and Information Solutions segments. The stock currently has a dividend yield of 3%. AVY has a PE ratio of 17.0. Currently there are 4 analysts that rate Avery Dennison a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Avery Dennison has been 820,100 shares per day over the past 30 days. Avery Dennison has a market cap of $4.4 billion and is part of the consumer goods sector and consumer durables industry. The stock has a beta of 1.12 and a short float of 2.2% with 2.04 days to cover. Shares are down 6.3% year-to-date as of the close of trading on Wednesday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Avery Dennison as a buy. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income, revenue growth, reasonable valuation levels and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:

  • AVERY DENNISON CORP has improved earnings per share by 10.6% 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, AVERY DENNISON CORP increased its bottom line by earning $2.43 versus $1.52 in the prior year. This year, the market expects an improvement in earnings ($3.05 versus $2.43).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the Containers & Packaging industry average, but is less than that of the S&P 500. The net income increased by 23.2% when compared to the same quarter one year prior, going from $57.80 million to $71.20 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 5.8%. Since the same quarter one year prior, revenues slightly increased by 3.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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