Barbarian At The Gate: Armstrong World Industries (AWI)

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 Armstrong World Industries ( AWI) 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 Armstrong World Industries as such a stock due to the following factors:

  • AWI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $38.1 million.
  • AWI has traded 280,111 shares today.
  • AWI traded in a range 254.5% of the normal price range with a price range of $3.27.
  • AWI traded above its daily resistance level (quality: 5 days, meaning that the stock is crossing a resistance level set by the last 5 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 AWI:

Armstrong World Industries, Inc. engages in the design, manufacture, and sale of flooring products and ceiling systems worldwide. AWI has a PE ratio of 28.0. Currently there are 3 analysts that rate Armstrong World Industries a buy, 1 analyst rates it a sell, and 7 rate it a hold.

The average volume for Armstrong World Industries has been 402,600 shares per day over the past 30 days. Armstrong World has a market cap of $3.2 billion and is part of the industrial goods sector and materials & construction industry. The stock has a beta of 1.34 and a short float of 8.5% with 2.46 days to cover. Shares are up 6.9% 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 Armstrong World Industries as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in stock price during the past year, largely solid financial position with reasonable debt levels by most measures 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:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 7.3%. Since the same quarter one year prior, revenues slightly increased by 4.6%. 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 where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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.
  • Even though the current debt-to-equity ratio is 1.37, it is still below the industry average, suggesting that this level of debt is acceptable within the Building Products industry. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.47 is sturdy.
  • 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. Compared to other companies in the Building Products industry and the overall market, ARMSTRONG WORLD INDUSTRIES's return on equity exceeds that of both the industry average and the S&P 500.
  • ARMSTRONG WORLD INDUSTRIES's earnings per share declined by 28.2% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ARMSTRONG WORLD INDUSTRIES increased its bottom line by earning $2.41 versus $1.91 in the prior year. For the next year, the market is expecting a contraction of 10.4% in earnings ($2.16 versus $2.41).

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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