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

Reliance Steel and Aluminum

(

RS

) 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 Reliance Steel and Aluminum as such a stock due to the following factors:

  • RS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $44.1 million.
  • RS has traded 538,389 shares today.
  • RS traded in a range 376.7% of the normal price range with a price range of $4.14.
  • RS traded above its daily resistance level (quality: 113 days, meaning that the stock is crossing a resistance level set by the last 113 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 RS:

Reliance Steel & Aluminum Co. operates as a metals service center company. The stock currently has a dividend yield of 2.8%. RS has a PE ratio of 12.0. Currently there are 6 analysts that rate Reliance Steel and Aluminum a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Reliance Steel and Aluminum has been 722,200 shares per day over the past 30 days. Reliance Steel and Aluminum has a market cap of $4.2 billion and is part of the basic materials sector and metals & mining industry. Shares are down 6.2% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Reliance Steel and Aluminum as a

buy

. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income, attractive valuation levels, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 18.5%. Since the same quarter one year prior, revenues rose by 11.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Metals & Mining industry. The net income increased by 49.4% when compared to the same quarter one year prior, rising from $61.80 million to $92.30 million.
  • Net operating cash flow has significantly increased by 60.59% to $193.20 million when compared to the same quarter last year. In addition, RELIANCE STEEL & ALUMINUM CO has also vastly surpassed the industry average cash flow growth rate of -51.48%.
  • Despite currently having a low debt-to-equity ratio of 0.57, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that RS's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.89 is high and demonstrates strong liquidity.

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