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
) 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 SolarWinds as such a stock due to the following factors:
- SWI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $40.3 million.
- SWI has traded 93,497 shares today.
- SWI traded in a range 253.2% of the normal price range with a price range of $2.48.
- SWI traded above its daily resistance level (quality: 525 days, meaning that the stock is crossing a resistance level set by the last 525 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 SWI:
SolarWinds, Inc. designs, develops, markets, sells, and supports enterprise-class information technology (IT) and infrastructure management software to IT professionals in various organizations worldwide. SWI has a PE ratio of 27.9. Currently there are 4 analysts that rate SolarWinds a buy, no analysts rate it a sell, and 4 rate it a hold.
The average volume for SolarWinds has been 560,100 shares per day over the past 30 days. SolarWinds has a market cap of $3.2 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 1.06 and a short float of 5.4% with 4.11 days to cover. Shares are up 13.5% year-to-date as of the close of trading on Monday.
rates SolarWinds as a
. 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, good cash flow from operations, expanding profit margins 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:
- SWI's revenue growth has slightly outpaced the industry average of 25.7%. Since the same quarter one year prior, revenues rose by 30.9%. 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.
- SWI's debt-to-equity ratio is very low at 0.08 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.13, which illustrates the ability to avoid short-term cash problems.
- Net operating cash flow has increased to $50.95 million or 25.15% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 10.20%.
- The gross profit margin for SOLARWINDS INC is currently very high, coming in at 97.96%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of 13.18% trails the industry average.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- You can view the full SolarWinds Ratings Report.