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

Telefonica Brasil

(

VIV

) 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 Telefonica Brasil as such a stock due to the following factors:

  • VIV has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $34.7 million.
  • VIV has traded 1.2 million shares today.
  • VIV traded in a range 206.6% of the normal price range with a price range of $0.69.
  • VIV traded above its daily resistance level (quality: 11 days, meaning that the stock is crossing a resistance level set by the last 11 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 VIV:

Telefonica Brasil S.A. provides fixed-line telecommunications services to residential and corporate customers in Brazil. The stock currently has a dividend yield of 8.9%. Currently there are 4 analysts that rate Telefonica Brasil a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Telefonica Brasil has been 2.9 million shares per day over the past 30 days. Telefonica Brasil has a market cap of $14.1 billion and is part of the technology sector and telecommunications industry. Shares are down 30.6% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Telefonica Brasil as a

hold

. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

  • VIV's debt-to-equity ratio is very low at 0.16 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that VIV's debt-to-equity ratio is low, the quick ratio, which is currently 0.59, displays a potential problem in covering short-term cash needs.
  • The gross profit margin for TELEFONICA BRASIL SA is rather high; currently it is at 61.65%. Regardless of VIV'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 6.45% trails the industry average.
  • 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 Diversified Telecommunication Services industry. The net income has significantly decreased by 37.9% when compared to the same quarter one year ago, falling from $293.00 million to $182.06 million.
  • Net operating cash flow has decreased to $314.97 million or 44.11% 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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