Barbarian At The Gate: Alpha Natural Resources (ANR)

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 Alpha Natural Resources ( ANR) 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 Alpha Natural Resources as such a stock due to the following factors:

  • ANR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $79.1 million.
  • ANR has traded 17.5 million shares today.
  • ANR traded in a range 225.2% of the normal price range with a price range of $0.84.
  • ANR traded above its daily resistance level (quality: 19 days, meaning that the stock is crossing a resistance level set by the last 19 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 ANR:

Alpha Natural Resources, Inc., together with its subsidiaries, engages in extracting, processing, and marketing steam and metallurgical coal in Virginia, West Virginia, Kentucky, Pennsylvania, and Wyoming. Currently there are 5 analysts that rate Alpha Natural Resources a buy, 4 analysts rate it a sell, and 10 rate it a hold.

The average volume for Alpha Natural Resources has been 11.2 million shares per day over the past 30 days. Alpha Natural has a market cap of $1.5 billion and is part of the basic materials sector and metals & mining industry. The stock has a beta of 2.50 and a short float of 25.3% with 5.48 days to cover. Shares are down 32.5% 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 Alpha Natural Resources as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 893.0% when compared to the same quarter one year ago, falling from -$46.15 million to -$458.24 million.
  • Net operating cash flow has decreased to $111.08 million or 34.77% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • The share price of ALPHA NATURAL RESOURCES INC has not done very well: it is down 14.50% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • ALPHA NATURAL RESOURCES INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ALPHA NATURAL RESOURCES INC reported poor results of -$11.06 versus -$3.25 in the prior year. This year, the market expects an improvement in earnings (-$2.28 versus -$11.06).
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ALPHA NATURAL RESOURCES INC's return on equity significantly trails that of both the industry average and 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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