PPG Industries (PPG) Marked As A Barbarian At The Gate

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 PPG Industries ( PPG) 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 PPG Industries as such a stock due to the following factors:

  • PPG has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $106.5 million.
  • PPG has traded 128,301 shares today.
  • PPG traded in a range 204.9% of the normal price range with a price range of $4.34.
  • PPG traded above its daily resistance level (quality: 531 days, meaning that the stock is crossing a resistance level set by the last 531 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 PPG:

PPG Industries, Inc. operates as a coatings and specialty products company. The stock currently has a dividend yield of 1.3%. PPG has a PE ratio of 23.0. Currently there are 11 analysts that rate PPG Industries a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for PPG Industries has been 708,900 shares per day over the past 30 days. PPG has a market cap of $26.0 billion and is part of the basic materials sector and chemicals industry. The stock has a beta of 1.20 and a short float of 0.7% with 1.81 days to cover. Shares are up 34.3% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates PPG Industries as a buy. 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, good cash flow from operations, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • PPG's revenue growth has slightly outpaced the industry average of 7.4%. Since the same quarter one year prior, revenues rose by 16.8%. 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.
  • The debt-to-equity ratio is somewhat low, currently at 0.65, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.23, which illustrates the ability to avoid short-term cash problems.
  • Net operating cash flow has increased to $788.00 million or 30.24% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -7.26%.
  • 43.77% is the gross profit margin for PPG INDUSTRIES INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 5.67% trails the industry average.
  • Compared to its closing price of one year ago, PPG's share price has jumped by 50.78%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.

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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