Skip to main content

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 or Stephanie Link.

Trade-Ideas LLC identified

Red Hat

(

RHT

) 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 Red Hat as such a stock due to the following factors:

  • RHT has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $116.0 million.
  • RHT has traded 1.7 million shares today.
  • RHT traded in a range 211.6% of the normal price range with a price range of $1.88.
  • RHT traded above its daily resistance level (quality: 444 days, meaning that the stock is crossing a resistance level set by the last 444 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.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in RHT with the Ticky from Trade-Ideas. See the FREE profile for RHT NOW at Trade-Ideas

More details on RHT:

TheStreet Recommends

Red Hat, Inc. provides open source software solutions primarily to enterprise customers worldwide. The company develops and offers operating system, middleware, virtualization, storage, and cloud technologies. RHT has a PE ratio of 59.6. Currently there are 13 analysts that rate Red Hat a buy, 1 analyst rates it a sell, and 7 rate it a hold.

The average volume for Red Hat has been 2.2 million shares per day over the past 30 days. Red Hat has a market cap of $9.3 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 1.11 and a short float of 4% with 2.76 days to cover. Shares are down 7.5% year-to-date as of the close of trading on Thursday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Red Hat as a

hold

. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and premium valuation.

Highlights from the ratings report include:

  • RHT's revenue growth has slightly outpaced the industry average of 6.2%. Since the same quarter one year prior, revenues rose by 16.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • RHT has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.12, which illustrates the ability to avoid short-term cash problems.
  • The net income growth from the same quarter one year ago has exceeded that of the Software industry average, but is less than that of the S&P 500. The net income increased by 16.6% when compared to the same quarter one year prior, going from $35.01 million to $40.81 million.
  • RHT has underperformed the S&P 500 Index, declining 7.95% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

null