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Total System Services (TSS) 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 Total System Services ( TSS) 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 Total System Services as such a stock due to the following factors:

  • TSS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $27.7 million.
  • TSS has traded 175,695 shares today.
  • TSS traded in a range 298.3% of the normal price range with a price range of $1.06.
  • TSS traded above its daily resistance level (quality: 13 days, meaning that the stock is crossing a resistance level set by the last 13 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 TSS:

Total System Services, Inc. provides electronic payment processing services to banks and other financial institutions in the United States and internationally. It operates through four segments: North America Services, Merchant Services, International Services, and NetSpend. The stock currently has a dividend yield of 1.3%. TSS has a PE ratio of 25.5. Currently there are 8 analysts that rate Total System Services a buy, no analysts rate it a sell, and 7 rate it a hold.

The average volume for Total System Services has been 1.6 million shares per day over the past 30 days. Total System Services has a market cap of $6.0 billion and is part of the financial sector and financial services industry. The stock has a beta of 1.07 and a short float of 2.1% with 2.74 days to cover. Shares are down 4.1% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Total System Services as a buy. 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, good cash flow from operations, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 13.6%. Since the same quarter one year prior, revenues rose by 32.1%. 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.
  • The debt-to-equity ratio is somewhat low, currently at 0.92, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, TSS has a quick ratio of 1.66, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has significantly increased by 183.58% to $148.71 million when compared to the same quarter last year. In addition, TOTAL SYSTEM SERVICES INC has also vastly surpassed the industry average cash flow growth rate of 2.40%.
  • TOTAL SYSTEM SERVICES INC's earnings per share declined by 13.3% in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. We anticipate these figures will begin to experience more growth in the coming year. During the past fiscal year, TOTAL SYSTEM SERVICES INC's EPS of $1.29 remained unchanged from the prior years' EPS of $1.29. This year, the market expects an improvement in earnings ($1.92 versus $1.29).
  • 39.03% is the gross profit margin for TOTAL SYSTEM SERVICES INC which we consider to be strong. Regardless of TSS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TSS's net profit margin of 8.31% is significantly lower than the industry average.

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