Watch Out: Barbarians At The Gate For Norfolk Southern (NSC)

Trade-Ideas LLC identified Norfolk Southern (NSC) 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

Norfolk Southern

(

NSC

) 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 Norfolk Southern as such a stock due to the following factors:

  • NSC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $161.0 million.
  • NSC has traded 838,350 shares today.
  • NSC traded in a range 230.1% of the normal price range with a price range of $4.14.
  • NSC traded above its daily resistance level (quality: 30 days, meaning that the stock is crossing a resistance level set by the last 30 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 NSC:

Norfolk Southern Corporation, together with its subsidiaries, engages in the rail transportation of raw materials, intermediate products, and finished goods. As of December 31, 2014, it operated approximately 20,000 miles of road in 22 states and the District of Columbia. The stock currently has a dividend yield of 2.9%. NSC has a PE ratio of 14. Currently there are 4 analysts that rate Norfolk Southern a buy, 3 analysts rate it a sell, and 11 rate it a hold.

The average volume for Norfolk Southern has been 2.1 million shares per day over the past 30 days. Norfolk Southern has a market cap of $23.9 billion and is part of the services sector and transportation industry. The stock has a beta of 1.10 and a short float of 1.9% with 3.10 days to cover. Shares are down 27.1% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Norfolk Southern as a

buy

. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • The debt-to-equity ratio is somewhat low, currently at 0.81, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that NSC's debt-to-equity ratio is low, the quick ratio, which is currently 0.65, displays a potential problem in covering short-term cash needs.
  • 40.80% is the gross profit margin for NORFOLK SOUTHERN CORP which we consider to be strong. Regardless of NSC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 16.66% trails the industry average.
  • NSC, with its decline in revenue, slightly underperformed the industry average of 7.3%. Since the same quarter one year prior, revenues fell by 10.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • NORFOLK SOUTHERN CORP's earnings per share declined by 16.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, NORFOLK SOUTHERN CORP increased its bottom line by earning $6.39 versus $6.04 in the prior year. For the next year, the market is expecting a contraction of 17.5% in earnings ($5.27 versus $6.39).
  • Looking at the price performance of NSC's shares over the past 12 months, there is not much good news to report: the stock is down 27.00%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Looking ahead, the stock's sharp decline over the past year may have been what was needed in order to bring its value into alignment with its fundamentals and others in its industry.

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