Watch Out: Barbarians At The Gate For Enbridge (ENB)

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 Enbridge ( ENB) 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 Enbridge as such a stock due to the following factors:

  • ENB has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $36.3 million.
  • ENB has traded 1.8 million shares today.
  • ENB traded in a range 200.1% of the normal price range with a price range of $1.17.
  • ENB traded above its daily resistance level (quality: 61 days, meaning that the stock is crossing a resistance level set by the last 61 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 ENB:

Enbridge Inc. operates as an energy transportation and distribution company in the United States and Canada. Its Liquids Pipelines segment operates common carrier and contract crude oil, natural gas liquids (NGL), and refined products pipelines and terminals. The stock currently has a dividend yield of 3.1%. ENB has a PE ratio of 41.2. Currently there are 6 analysts that rate Enbridge a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Enbridge has been 796,300 shares per day over the past 30 days. Enbridge has a market cap of $35.5 billion and is part of the basic materials sector and energy industry. Shares are down 1.2% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Enbridge as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, generally higher debt management risk and disappointing return on equity.

Highlights from the ratings report include:
  • ENB's very impressive revenue growth greatly exceeded the industry average of 5.6%. Since the same quarter one year prior, revenues leaped by 58.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 115.6% when compared to the same quarter one year prior, rising from $218.00 million to $470.00 million.
  • ENBRIDGE INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, ENBRIDGE INC reported lower earnings of $0.77 versus $1.31 in the prior year.
  • 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ENBRIDGE INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • The gross profit margin for ENBRIDGE INC is currently extremely low, coming in at 11.04%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 5.22% trails that of the industry average.

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