Watch Out: Barbarians At The Gate For Conn's (CONN)
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 Conn's as such a stock due to the following factors:
- CONN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $25.5 million.
- CONN has traded 2.4 million shares today.
- CONN traded in a range 252.5% of the normal price range with a price range of $4.50.
- CONN 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 CONN:
Conn's, Inc. operates as a specialty retailer of durable consumer goods and related services in Texas, Arizona, Louisiana, Oklahoma, and New Mexico, the United States. CONN has a PE ratio of 15.5. Currently there are 3 analysts that rate Conn's a buy, no analysts rate it a sell, and 4 rate it a hold.
The average volume for Conn's has been 1.1 million shares per day over the past 30 days. Conn's has a market cap of $1.1 billion and is part of the services sector and retail industry. The stock has a beta of 2.32 and a short float of 50.5% with 15.82 days to cover. Shares are up 53.4% year-to-date as of the close of trading on Monday.
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Analysis:
rates Conn's as a
. The company's strengths can be seen in multiple areas, such as its robust revenue growth, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.
Highlights from the ratings report include:
- CONN's revenue growth has slightly outpaced the industry average of 13.1%. Since the same quarter one year prior, revenues rose by 19.0%. 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.
- Even though the current debt-to-equity ratio is 1.09, it is still below the industry average, suggesting that this level of debt is acceptable within the Specialty Retail industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 4.24 is very high and demonstrates very strong liquidity.
- 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 Specialty Retail industry. The net income has significantly decreased by 112.6% when compared to the same quarter one year ago, falling from $24.38 million to -$3.06 million.
- 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. In comparison to the other companies in the Specialty Retail industry and the overall market, CONN'S INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full Conn's Ratings Report.
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