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Watch Out: Barbarians At The Gate For Lions Gate Entertainment (LGF)

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 Lions Gate Entertainment ( LGF) 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 Lions Gate Entertainment as such a stock due to the following factors:

  • LGF has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $42.1 million.
  • LGF has traded 596,670 shares today.
  • LGF traded in a range 280.5% of the normal price range with a price range of $1.95.
  • LGF traded above its daily resistance level (quality: 123 days, meaning that the stock is crossing a resistance level set by the last 123 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 LGF with the Ticky from Trade-Ideas. See the FREE profile for LGF NOW at Trade-Ideas

More details on LGF:

Lions Gate Entertainment Corp., an entertainment company, is engaged in motion picture production and distribution, television programming and syndication, home entertainment, family entertainment, digital distribution, new channel platforms, and international distribution and sales activities. The stock currently has a dividend yield of 0.7%. LGF has a PE ratio of 27.5. Currently there are 7 analysts that rate Lions Gate Entertainment a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Lions Gate Entertainment has been 1.6 million shares per day over the past 30 days. Lions Gate Entertainment has a market cap of $4.0 billion and is part of the services sector and media industry. The stock has a beta of 0.98 and a short float of 12.5% with 7.67 days to cover. Shares are down 9.2% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Lions Gate Entertainment as a buy. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:

  • Net operating cash flow has significantly increased by 84.37% to $106.68 million when compared to the same quarter last year. In addition, LIONS GATE ENTERTAINMENT CP has also vastly surpassed the industry average cash flow growth rate of 5.49%.
  • 44.09% is the gross profit margin for LIONS GATE ENTERTAINMENT CP which we consider to be strong. Regardless of LGF's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 6.80% trails the industry average.
  • LGF, with its decline in revenue, underperformed when compared the industry average of 14.6%. Since the same quarter one year prior, revenues slightly dropped by 8.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Media industry and the overall market, LIONS GATE ENTERTAINMENT CP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Although LGF's debt-to-equity ratio of 2.82 is very high, it is currently less than that of the industry average.

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