Barbarian At The Gate: Owens-Corning (OC)

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 Owens-Corning ( OC) 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 Owens-Corning as such a stock due to the following factors:

  • OC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $52.6 million.
  • OC has traded 1.2 million shares today.
  • OC traded in a range 202.6% of the normal price range with a price range of $1.46.
  • OC traded above its daily resistance level (quality: 32 days, meaning that the stock is crossing a resistance level set by the last 32 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 OC:

Owens Corning produces and sells glass fiber reinforcements and other materials for composite systems; and residential and commercial building materials worldwide. It operates in two segments, Composites and Building Materials. OC has a PE ratio of 67.0. Currently there are 9 analysts that rate Owens-Corning a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for Owens-Corning has been 1.7 million shares per day over the past 30 days. Owens-Corning has a market cap of $4.3 billion and is part of the industrial goods sector and materials & construction industry. The stock has a beta of 2.25 and a short float of 4.3% with 3.47 days to cover. Shares are down 0.3% year to date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Owens-Corning as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and poor profit margins.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 7.8%. Since the same quarter one year prior, revenues slightly increased by 3.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.60, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.85 is somewhat weak and could be cause for future problems.
  • The gross profit margin for OWENS CORNING is currently lower than what is desirable, coming in at 25.76%. Regardless of OC's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 3.86% trails the industry average.
  • 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 on the basis of return on equity, OWENS CORNING underperformed against that of the industry average and is significantly less than that of the S&P 500.

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