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

MeadWestvaco

(

MWV

) 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 MeadWestvaco as such a stock due to the following factors:

  • MWV has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $59.5 million
  • MWV has traded 146,322 shares today
  • MWV traded in a range 219.5% of the normal price range with a price range of $1.68
  • MWV traded above its daily resistance level (quality: 14 days, meaning that the stock is crossing a resistance level set by the last 14 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 MWV:

MeadWestvaco Corporation provides packaging solutions to the healthcare, beauty and personal care, food, beverage, home and garden, tobacco, and agricultural industries worldwide. The stock currently has a dividend yield of 2.1%. MWV has a PE ratio of 30.3900000000000005684341886080801486968994140625. Currently there are two analysts that rate MeadWestvaco a buy, two analysts rate it a sell, and three rate it a hold.

The average volume for MeadWestvaco has been 1.2 million shares per day over the past 30 days. MeadWestvaco has a market cap of $7.8 billion and is part of the consumer goods sector and consumer non-durables industry. Shares are up 4.8% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates MeadWestvaco as a

buy

. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • MWV's revenue growth has slightly outpaced the industry average of 3.0%. Since the same quarter one year prior, revenues slightly increased by 4.9%. 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 current debt-to-equity ratio, 0.58, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.03, which illustrates the ability to avoid short-term cash problems.
  • Net operating cash flow has significantly increased by 68.36% to $298.00 million when compared to the same quarter last year. In addition, MEADWESTVACO CORP has also vastly surpassed the industry average cash flow growth rate of 7.04%.
  • MEADWESTVACO CORP 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. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, MEADWESTVACO CORP reported lower earnings of $1.52 versus $1.78 in the prior year. This year, the market expects an improvement in earnings ($1.85 versus $1.52).
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

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