Watch Out: Barbarians At The Gate For Arthur J. Gallagher (AJG)

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 Arthur J. Gallagher ( AJG) 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 Arthur J. Gallagher as such a stock due to the following factors:

  • AJG has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $28.7 million.
  • AJG has traded 501,773 shares today.
  • AJG traded in a range 248.6% of the normal price range with a price range of $1.56.
  • AJG traded above its daily resistance level (quality: 4 days, meaning that the stock is crossing a resistance level set by the last 4 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 AJG:

Arthur J. Gallagher & Co. and its subsidiaries provide insurance brokerage and risk management services to various commercial, industrial, institutional, and governmental organizations. It operates in two segments, Brokerage and Risk Management. The stock currently has a dividend yield of 3.2%. AJG has a PE ratio of 24.6. Currently there are 6 analysts that rate Arthur J. Gallagher a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for Arthur J. Gallagher has been 544,600 shares per day over the past 30 days. Arthur J. Gallagher has a market cap of $5.8 billion and is part of the financial sector and insurance industry. The stock has a beta of 0.98 and a short float of 0.6% with 1.34 days to cover. Shares are up 27.8% year to date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Arthur J. Gallagher as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, growth in earnings per share, compelling growth in net income and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 9.0%. Since the same quarter one year prior, revenues rose by 19.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 35.15% over the past year, a rise that has exceeded that of the S&P 500 Index. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
  • ARTHUR J GALLAGHER & CO has improved earnings per share by 23.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, ARTHUR J GALLAGHER & CO increased its bottom line by earning $1.60 versus $1.27 in the prior year. This year, the market expects an improvement in earnings ($2.21 versus $1.60).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Insurance industry average. The net income increased by 30.4% when compared to the same quarter one year prior, rising from $71.70 million to $93.50 million.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Insurance industry and the overall market on the basis of return on equity, ARTHUR J GALLAGHER & CO has outperformed in comparison with the industry average, but has underperformed when compared to 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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