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Trade-Ideas: Hexcel (HXL) 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 Hexcel ( HXL) 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 Hexcel as such a stock due to the following factors:

  • HXL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $26.2 million.
  • HXL has traded 1.2 million shares today.
  • HXL traded in a range 210% of the normal price range with a price range of $1.24.
  • HXL traded above its daily resistance level (quality: 39 days, meaning that the stock is crossing a resistance level set by the last 39 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 HXL with the Ticky from Trade-Ideas. See the FREE profile for HXL NOW at Trade-Ideas

More details on HXL:

Hexcel Corporation, together with its subsidiaries, engages in the development, manufacture, and marketing of lightweight and high-performance structural materials for use in commercial aerospace, space and defense, and industrial applications. HXL has a PE ratio of 21.2. Currently there are 7 analysts that rate Hexcel a buy, 1 analyst rates it a sell, and 2 rate it a hold.

The average volume for Hexcel has been 735,300 shares per day over the past 30 days. Hexcel has a market cap of $4.0 billion and is part of the industrial goods sector and aerospace/defense industry. The stock has a beta of 0.79 and a short float of 0.7% with 1.75 days to cover. Shares are down 9.2% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Hexcel as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, increase in net income and solid stock price performance. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:

  • HXL's revenue growth has slightly outpaced the industry average of 3.1%. Since the same quarter one year prior, revenues rose by 10.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The current debt-to-equity ratio, 0.30, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.25, which illustrates the ability to avoid short-term cash problems.
  • HEXCEL CORP has improved earnings per share by 16.3% 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, HEXCEL CORP increased its bottom line by earning $1.85 versus $1.61 in the prior year. This year, the market expects an improvement in earnings ($2.13 versus $1.85).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Aerospace & Defense industry average. The net income increased by 14.9% when compared to the same quarter one year prior, going from $43.60 million to $50.10 million.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.

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