Trade-Ideas LLC identified

American Capital

(

ACAS

) 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 American Capital as such a stock due to the following factors:

  • ACAS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $45.1 million.
  • ACAS has traded 2.5 million shares today.
  • ACAS traded in a range 213.2% of the normal price range with a price range of $0.51.
  • ACAS traded above its daily resistance level (quality: 51 days, meaning that the stock is crossing a resistance level set by the last 51 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 ACAS:

TheStreet Recommends

American Capital, Ltd. is a private equity and venture capital firm specializing in management and employee buyouts, subordinated debt, leveraged finance, mezzanine, acquisition, recapitalization, middle market, early venture, mature, industry consolidation, and growth capital investments. ACAS has a PE ratio of 21. Currently there are 4 analysts that rate American Capital a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for American Capital has been 2.4 million shares per day over the past 30 days. American has a market cap of $3.5 billion and is part of the financial sector and financial services industry. The stock has a beta of 0.94 and a short float of 2% with 1.53 days to cover. Shares are down 12.2% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates American Capital as a

hold

. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, unimpressive growth in net income and feeble growth in the company's earnings per share.

Highlights from the ratings report include:

  • ACAS's very impressive revenue growth greatly exceeded the industry average of 4.7%. Since the same quarter one year prior, revenues leaped by 68.0%. 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.
  • The gross profit margin for AMERICAN CAPITAL LTD is rather high; currently it is at 69.64%. It has increased significantly from the same period last year. Along with this, the net profit margin of 36.90% significantly outperformed against 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 Capital Markets industry. The net income has significantly decreased by 70.8% when compared to the same quarter one year ago, falling from $212.00 million to $62.00 million.
  • The share price of AMERICAN CAPITAL LTD has not done very well: it is down 8.63% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.

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