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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

Dril-Quip

(

DRQ

) 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 Dril-Quip as such a stock due to the following factors:

  • DRQ has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $33.8 million.
  • DRQ has traded 334,529 shares today.
  • DRQ traded in a range 237.1% of the normal price range with a price range of $4.01.
  • DRQ traded above its daily resistance level (quality: 61 days, meaning that the stock is crossing a resistance level set by the last 61 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 DRQ:

Dril-Quip, Inc., together with its subsidiaries, designs, manufactures, sells, and services engineered offshore drilling and production equipment for use in deepwater, harsh environment, and severe service applications worldwide. DRQ has a PE ratio of 13.7. Currently there are 4 analysts that rate Dril-Quip a buy, 1 analyst rates it a sell, and 5 rate it a hold.

The average volume for Dril-Quip has been 546,000 shares per day over the past 30 days. Dril-Quip has a market cap of $2.8 billion and is part of the basic materials sector and energy industry. The stock has a beta of 0.97 and a short float of 4.3% with 3.39 days to cover. Shares are down 5.5% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Dril-Quip as a

hold

. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

Highlights from the ratings report include:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Energy Equipment & Services industry. The net income increased by 25.5% when compared to the same quarter one year prior, rising from $47.06 million to $59.09 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 15.0%. Since the same quarter one year prior, revenues slightly increased by 9.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Energy Equipment & Services industry and the overall market on the basis of return on equity, DRIL-QUIP INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • DRIL-QUIP INC has improved earnings per share by 30.4% 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 two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, DRIL-QUIP INC increased its bottom line by earning $5.21 versus $4.16 in the prior year. For the next year, the market is expecting a contraction of 9.8% in earnings ($4.70 versus $5.21).
  • DRQ's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 35.79%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.

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