Barbarian At The Gate: Rock-Tenn Company (RKT)

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 Rock-Tenn Company ( RKT) 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 Rock-Tenn Company as such a stock due to the following factors:

  • RKT has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $71.2 million.
  • RKT has traded 776,625 shares today.
  • RKT traded in a range 211.4% of the normal price range with a price range of $3.73.
  • RKT traded above its daily resistance level (quality: 37 days, meaning that the stock is crossing a resistance level set by the last 37 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 RKT:

Rock-Tenn Company manufactures and sells corrugated and consumer packaging products in the United States, Canada, Mexico, Chile, Argentina, Puerto Rico, and China. The company operates in three segments: Corrugated Packaging, Consumer Packaging, and Recycling. The stock currently has a dividend yield of 1.5%. RKT has a PE ratio of 9.6. Currently there are 8 analysts that rate Rock-Tenn Company a buy, 1 analyst rates it a sell, and 4 rate it a hold.

The average volume for Rock-Tenn Company has been 822,100 shares per day over the past 30 days. Rock-Tenn has a market cap of $6.9 billion and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 1.71 and a short float of 1.3% with 0.79 days to cover. Shares are up 36.6% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Rock-Tenn Company as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, notable return on equity, attractive valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • RKT's revenue growth has slightly outpaced the industry average of 3.0%. Since the same quarter one year prior, revenues slightly increased by 5.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 110.52% and other important driving factors, this stock has surged by 46.27% over the past year, outperforming the rise in the S&P 500 Index during the same period. 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.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Containers & Packaging industry and the overall market, ROCK-TENN CO's return on equity exceeds that of both the industry average and the S&P 500.
  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Containers & Packaging industry average. The net income increased by 114.5% when compared to the same quarter one year prior, rising from $82.30 million to $176.50 million.

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