Trade-Ideas: Coca-Cola (KO) Is Today's

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 Coca-Cola ( KO) 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 Coca-Cola as such a stock due to the following factors:

  • KO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $557.3 million.
  • KO has traded 9.2 million shares today.
  • KO traded in a range 209% of the normal price range with a price range of $0.90.
  • KO 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 KO:

The Coca-Cola Company, a beverage company, engages in the manufacture, marketing, and sale of nonalcoholic beverages worldwide. The company primarily offers sparkling beverages and still beverages. The stock currently has a dividend yield of 2.9%. KO has a PE ratio of 20.1. Currently there are 10 analysts that rate Coca-Cola a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Coca-Cola has been 13.5 million shares per day over the past 30 days. Coca-Cola has a market cap of $169.3 billion and is part of the consumer goods sector and food & beverage industry. The stock has a beta of 0.29 and a short float of 0.7% with 1.88 days to cover. Shares are up 4.6% year to date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Coca-Cola as a buy. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • COCA-COLA CO' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, COCA-COLA CO increased its bottom line by earning $1.96 versus $1.85 in the prior year. This year, the market expects an improvement in earnings ($2.10 versus $1.96).
  • The gross profit margin for COCA-COLA CO is rather high; currently it is at 64.59%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, KO's net profit margin of 20.98% significantly trails the industry average.
  • KO, with its decline in revenue, slightly underperformed the industry average of 0.9%. Since the same quarter one year prior, revenues slightly dropped by 2.6%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Beverages industry and the overall market, COCA-COLA CO's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.

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