Expect an Accelerated Selloff if Cracker Barrel (CBRL) Stock Drops Below $130

Shares of Cracker Barrel (CBRL) look like they have rolled over.
By Bruce Kamich ,

NEW YORK (TheStreet) -- If you have ever driven south through Maryland and Virginia you can easily lose count of the number of Cracker Barrel (CBRL) - Get Report stores located conveniently near a highway exit. We may be saturated with Cracker Barrel stores and the shares of CBRL look like they have rolled over.

Prices have rolled over in the chart above. First, the rallies to $160 failed. Then, during August and September the rallies over $150 have failed, and now it looks like rallies to $140 are failing. The On-Balance-Volume (OBV) line is edging lower and the Moving Average Convergence Divergence (MACD) oscillator is in negative territory.

This weekly chart shows how prices broke below the 40-week moving average and are now failing at the average from below. The OBV line is weakening and the MACD oscillator peaked earlier in the year. A close below $130 will weaken the chart picture and probably accelerate selling in the weeks ahead.

TheStreet Ratings team rates CRACKER BARREL OLD CTRY STOR as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

We rate CRACKER BARREL OLD CTRY STOR (CBRL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, impressive record of earnings per share growth, compelling growth in net income and notable return on equity. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • CBRL's revenue growth has slightly outpaced the industry average of 1.5%. Since the same quarter one year prior, revenues slightly increased by 3.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • CRACKER BARREL OLD CTRY STOR has improved earnings per share by 20.9% 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, CRACKER BARREL OLD CTRY STOR increased its bottom line by earning $6.82 versus $5.52 in the prior year. This year, the market expects an improvement in earnings ($7.25 versus $6.82).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Hotels, Restaurants & Leisure industry average. The net income increased by 21.0% when compared to the same quarter one year prior, going from $39.19 million to $47.40 million.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, CRACKER BARREL OLD CTRY STOR's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • You can view the full analysis from the report here: CBRL

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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