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Proto Labs (PRLB) Marked As A Barbarian At The Gate

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 Proto Labs ( PRLB) 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 Proto Labs as such a stock due to the following factors:

  • PRLB has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $33.5 million.
  • PRLB has traded 591,405 shares today.
  • PRLB traded in a range 254.6% of the normal price range with a price range of $6.28.
  • PRLB traded above its daily resistance level (quality: 230 days, meaning that the stock is crossing a resistance level set by the last 230 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 PRLB:

Proto Labs, Inc., together with its subsidiaries, manufactures computer numerical control (CNC) machined and injection molded custom parts for prototyping and short-run production. PRLB has a PE ratio of 56.7. Currently there are 6 analysts that rate Proto Labs a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Proto Labs has been 394,100 shares per day over the past 30 days. Proto has a market cap of $2.1 billion and is part of the industrial goods sector and industrial industry. The stock has a beta of -0.58 and a short float of 11% with 7.46 days to cover. Shares are up 15.1% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Proto Labs 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 impressive record of earnings per share growth. However, as a counter to these strengths, we find that the stock itself is trading at a premium valuation.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 6.5%. Since the same quarter one year prior, revenues rose by 23.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • PRLB's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 5.97, which clearly demonstrates the ability to cover short-term cash needs.
  • 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 Machinery industry and the overall market on the basis of return on equity, PROTO LABS INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • Compared to where it was 12 months ago, this stock has enjoyed a nice rise of 26.57% which was in line with the performance of the S&P 500 Index. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.

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