NEW YORK (TheStreet) --Diamond Foods (DMND) is one of those names that we know but we don't know. We know plenty of its products, like Pop Secret popcorn, but we don't necessarily know the corporate name.
DMND has been stuck in a broad, sideways consolidation between $25 and $35 as can be seen in the chart above. Diamond has been making higher lows in recent months, but the topside is still restrained at $35. In a better market environment, we would anticipate an upside breakout soon.
In this long-term log chart of DMND, we can see the big decline and the subsequent recovery process. The sideways price action around $30 looks clearer on this chart, above, and the upside potential for DMND can also be seen. Prices could double from this $30 base to around $60, which is the underside of a resistance area. Investors could either buy available weakness and use a sell stop under $29.50 or look to buy a breakout over $35 that is accompanied by a sharp increase in volume.
Separately, TheStreet Ratings team rates DIAMOND FOODS INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
We rate DIAMOND FOODS INC (DMND) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, good cash flow from operations, solid stock price performance and notable return on equity. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- DIAMOND FOODS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, DIAMOND FOODS INC continued to lose money by earning -$6.29 versus -$8.13 in the prior year. This year, the market expects an improvement in earnings ($1.08 versus -$6.29).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Food Products industry. The net income increased by 106.0% when compared to the same quarter one year prior, rising from -$105.63 million to $6.29 million.
- Net operating cash flow has significantly increased by 96.66% to -$5.46 million when compared to the same quarter last year. In addition, DIAMOND FOODS INC has also vastly surpassed the industry average cash flow growth rate of 8.54%.
- Powered by its strong earnings growth of 105.50% and other important driving factors, this stock has surged by 25.41% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 9.0%. Since the same quarter one year prior, revenues slightly dropped by 2.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full analysis from the report here: DMND