Trade-Ideas: LM Ericsson Telephone Company (ERIC) Is Today's "Barbarian At The Gate" Stock

Trade-Ideas LLC identified LM Ericsson Telephone Company (ERIC) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate
By TheStreet Wire ,

Trade-Ideas LLC identified

LM Ericsson Telephone Company

(

ERIC

) 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 LM Ericsson Telephone Company as such a stock due to the following factors:

  • ERIC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $31.2 million.
  • ERIC has traded 2.4 million shares today.
  • ERIC traded in a range 212.6% of the normal price range with a price range of $0.41.
  • ERIC traded above its daily resistance level (quality: 3 days, meaning that the stock is crossing a resistance level set by the last 3 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 ERIC:

Ericsson provides communications technology and services worldwide. The company's Networks segment delivers products and solutions for mobile access, Internet protocol (IP) and transmission networks, core networks, and cloud. The stock currently has a dividend yield of 2.7%. Currently there are 4 analysts that rate LM Ericsson Telephone Company a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for LM Ericsson Telephone Company has been 3.1 million shares per day over the past 30 days. LM Ericsson Telephone has a market cap of $31.0 billion and is part of the technology sector and telecommunications industry. Shares are down 23.6% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates LM Ericsson Telephone Company as a

hold

. 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 and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and disappointing return on equity.

Highlights from the ratings report include:

  • ERIC's revenue growth has slightly outpaced the industry average of 9.6%. Since the same quarter one year prior, revenues slightly increased by 0.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • ERIC's debt-to-equity ratio is very low at 0.19 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.45, which illustrates the ability to avoid short-term cash problems.
  • ERICSSON has improved earnings per share by 22.2% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ERICSSON reported lower earnings of $0.45 versus $0.58 in the prior year. This year, the market expects an improvement in earnings ($0.63 versus $0.45).
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Communications Equipment industry and the overall market on the basis of return on equity, ERICSSON has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • ERIC has underperformed the S&P 500 Index, declining 15.76% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.

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