Watch Out: Barbarians At The Gate For Lannett (LCI)

Trade-Ideas LLC identified Lannett (LCI) 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

Lannett

(

LCI

) 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 Lannett as such a stock due to the following factors:

  • LCI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $20.1 million.
  • LCI has traded 1.3 million shares today.
  • LCI traded in a range 229.2% of the normal price range with a price range of $2.54.
  • LCI traded above its daily resistance level (quality: 157 days, meaning that the stock is crossing a resistance level set by the last 157 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 LCI:

Lannett Company, Inc. develops, manufactures, packages, markets, and distributes generic versions of branded pharmaceutical products in the United States. LCI has a PE ratio of 3. Currently there are 4 analysts that rate Lannett a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Lannett has been 837,000 shares per day over the past 30 days. Lannett has a market cap of $907.3 million and is part of the health care sector and drugs industry. The stock has a beta of 2.47 and a short float of 36.1% with 13.59 days to cover. Shares are down 38.7% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Lannett as a

hold

. The company's strengths can be seen in multiple areas, such as its robust revenue growth, reasonable valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity.

Highlights from the ratings report include:

  • LCI's very impressive revenue growth greatly exceeded the industry average of 1.3%. Since the same quarter one year prior, revenues leaped by 64.8%. 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 gross profit margin for LANNETT CO INC is rather high; currently it is at 62.33%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, LCI's net profit margin of -3.35% significantly underperformed when compared to the industry average.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 58.01%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 115.46% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • 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 Pharmaceuticals industry. The net income has significantly decreased by 115.2% when compared to the same quarter one year ago, falling from $36.23 million to -$5.49 million.

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