Trade-Ideas: ConAgra Foods (CAG) 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.
Trade-Ideas LLC identified
(
) 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 ConAgra Foods as such a stock due to the following factors:
- CAG has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $92.9 million.
- CAG has traded 3.2 million shares today.
- CAG traded in a range 274.1% of the normal price range with a price range of $1.67.
- CAG traded above its daily resistance level (quality: 43 days, meaning that the stock is crossing a resistance level set by the last 43 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 CAG:
ConAgra Foods, Inc. operates as a food company primarily in North America. The company operates through three segments: Consumer Foods, Commercial Foods, and Private Brands. The stock currently has a dividend yield of 2.9%. CAG has a PE ratio of 166.4. Currently there is 1 analyst that rates ConAgra Foods a buy, 1 analyst rates it a sell, and 6 rate it a hold.
The average volume for ConAgra Foods has been 2.7 million shares per day over the past 30 days. ConAgra has a market cap of $14.9 billion and is part of the consumer goods sector and food & beverage industry. The stock has a beta of 0.50 and a short float of 1.5% with 2.45 days to cover. Shares are down 4.2% year-to-date as of the close of trading on Thursday.
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Analysis:
rates ConAgra Foods as a
. Among the primary strengths of the company is its 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:
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 10.1%. Since the same quarter one year prior, revenues slightly dropped by 1.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- CONAGRA FOODS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, CONAGRA FOODS INC reported lower earnings of $0.60 versus $1.87 in the prior year. This year, the market expects an improvement in earnings ($2.14 versus $0.60).
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. 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.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Food Products industry. The net income has significantly decreased by 96.0% when compared to the same quarter one year ago, falling from $248.70 million to $10.00 million.
- Currently the debt-to-equity ratio of 1.52 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with this, the company manages to maintain a quick ratio of 0.39, which clearly demonstrates the inability to cover short-term cash needs.
- You can view the full ConAgra Foods Ratings Report.
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