Watch Out: Barbarians At The Gate For Anglogold Ashanti (AU)

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 Anglogold Ashanti ( AU) 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 Anglogold Ashanti as such a stock due to the following factors:

  • AU has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $54.5 million.
  • AU has traded 2.3 million shares today.
  • AU traded in a range 215.6% of the normal price range with a price range of $1.14.
  • AU traded above its daily resistance level (quality: 126 days, meaning that the stock is crossing a resistance level set by the last 126 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 AU:

AngloGold Ashanti Limited engages in the exploration, production, and marketing of gold. It also produces by-products, such as silver, uranium, and sulfuric acid. The stock currently has a dividend yield of 1.9%. AU has a PE ratio of 7.8. Currently there is 1 analyst that rates Anglogold Ashanti a buy, 2 analysts rate it a sell, and 1 rates it a hold.

The average volume for Anglogold Ashanti has been 4.2 million shares per day over the past 30 days. Anglogold Ashanti has a market cap of $4.8 billion and is part of the basic materials sector and metals & mining industry. Shares are down 59.8% year to date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Anglogold Ashanti as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, generally high debt management risk, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:
  • ANGLOGOLD ASHANTI LTD 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. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, ANGLOGOLD ASHANTI LTD reported lower earnings of $1.73 versus $3.83 in the prior year. For the next year, the market is expecting a contraction of 65.9% in earnings ($0.59 versus $1.73).
  • 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 Metals & Mining industry. The net income has significantly decreased by 814.5% when compared to the same quarter one year ago, falling from $303.00 million to -$2,165.00 million.
  • The debt-to-equity ratio of 1.10 is relatively high when compared with the industry average, suggesting a need for better debt level management.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Metals & Mining industry and the overall market, ANGLOGOLD ASHANTI LTD's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to $150.00 million or 67.60% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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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