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

ADT

(

ADT

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

  • ADT has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $62.9 million.
  • ADT has traded 890,481 shares today.
  • ADT traded in a range 337.3% of the normal price range with a price range of $2.36.
  • ADT traded above its daily resistance level (quality: 7 days, meaning that the stock is crossing a resistance level set by the last 7 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 ADT:

The ADT Corporation provides monitored security, interactive home and business automation, and related monitoring services in the United States and Canada. The stock currently has a dividend yield of 2.6%. ADT has a PE ratio of 18. Currently there are 4 analysts that rate ADT a buy, 2 analysts rate it a sell, and 2 rate it a hold.

The average volume for ADT has been 2.1 million shares per day over the past 30 days. ADT has a market cap of $5.5 billion and is part of the services sector and diversified services industry. The stock has a beta of 1.05 and a short float of 28.9% with 21.77 days to cover. Shares are down 9.2% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates ADT as a

hold

. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and increase in net income. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 3.8%. Since the same quarter one year prior, revenues slightly increased by 6.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • ADT CORP has improved earnings per share by 17.6% 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, ADT CORP reported lower earnings of $1.67 versus $1.88 in the prior year. This year, the market expects an improvement in earnings ($2.00 versus $1.67).
  • 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 Commercial Services & Supplies industry and the overall market, ADT CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • Net operating cash flow has declined marginally to $387.00 million or 8.29% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

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