Trade-Ideas LLC identified

Level 3 Communications

(

LVLT

) 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 Level 3 Communications as such a stock due to the following factors:

  • LVLT has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $125.2 million.
  • LVLT has traded 129,562 shares today.
  • LVLT traded in a range 303.6% of the normal price range with a price range of $3.03.
  • LVLT traded above its daily resistance level (quality: 91 days, meaning that the stock is crossing a resistance level set by the last 91 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 LVLT:

TheStreet Recommends

Level 3 Communications, Inc., together with its subsidiaries, operates as a facilities-based provider of a range of integrated communications services primarily in North America, Latin America, Europe, the Middle East, and Africa. LVLT has a PE ratio of 58. Currently there are 11 analysts that rate Level 3 Communications a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Level 3 Communications has been 2.7 million shares per day over the past 30 days. Level 3 has a market cap of $17.4 billion and is part of the technology sector and telecommunications industry. The stock has a beta of 1.43 and a short float of 2.3% with 2.23 days to cover. Shares are down 0.8% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Level 3 Communications as a

hold

. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and disappointing return on equity.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 0.3%. Since the same quarter one year prior, revenues rose by 26.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has increased to $419.00 million or 38.28% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 4.52%.
  • LEVEL 3 COMMUNICATIONS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, LEVEL 3 COMMUNICATIONS INC turned its bottom line around by earning $1.24 versus -$0.50 in the prior year. This year, the market expects an improvement in earnings ($1.25 versus $1.24).
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. In comparison to the other companies in the Diversified Telecommunication Services industry and the overall market, LEVEL 3 COMMUNICATIONS INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • 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 125.5% when compared to the same quarter one year ago, falling from $51.00 million to -$13.00 million.

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