Barbarian At The Gate: Eaton Corporation (ETN)

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 Eaton Corporation ( ETN) 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 Eaton Corporation as such a stock due to the following factors:

  • ETN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $209.5 million.
  • ETN has traded 3.0 million shares today.
  • ETN traded in a range 222.4% of the normal price range with a price range of $3.46.
  • ETN traded above its daily resistance level (quality: 29 days, meaning that the stock is crossing a resistance level set by the last 29 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 ETN:

Eaton Corporation plc operates as a diversified power management company worldwide. The company operates through Electrical Americas, Electrical Rest of World, Cooper, Hydraulics, Aerospace, Truck, and Automotive segments. The stock currently has a dividend yield of 2.4%. ETN has a PE ratio of 21.7. Currently there are 13 analysts that rate Eaton Corporation a buy, 1 analyst rates it a sell, and 4 rate it a hold.

The average volume for Eaton Corporation has been 2.5 million shares per day over the past 30 days. Eaton has a market cap of $33.4 billion and is part of the technology sector and electronics industry. The stock has a beta of 1.65 and a short float of 1.2% with 1.58 days to cover. Shares are up 30% year to date as of the close of trading on Friday.

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

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Eaton Corporation as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, reasonable valuation levels, expanding profit margins and good cash flow from operations. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 8.1%. Since the same quarter one year prior, revenues rose by 37.7%. 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.
  • Compared to its closing price of one year ago, ETN's share price has jumped by 44.05%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, ETN should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • 35.29% is the gross profit margin for EATON CORP PLC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 8.81% is above that of the industry average.
  • Net operating cash flow has increased to $609.00 million or 29.85% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 13.58%.

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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