Barbarian At The Gate: Charter Communications (CHTR)

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 Charter Communications ( CHTR) 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 Charter Communications as such a stock due to the following factors:

  • CHTR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $145.6 million.
  • CHTR has traded 1.4 million shares today.
  • CHTR traded in a range 221.3% of the normal price range with a price range of $6.11.
  • CHTR traded above its daily resistance level (quality: 11 days, meaning that the stock is crossing a resistance level set by the last 11 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 CHTR:

Charter Communications, Inc., through its subsidiaries, provides entertainment, information, and communications solutions to residential and commercial customers in the United States. Currently there are 2 analysts that rate Charter Communications a buy, no analysts rate it a sell, and 9 rate it a hold.

The average volume for Charter Communications has been 943,500 shares per day over the past 30 days. Charter has a market cap of $13.9 billion and is part of the services sector and media industry. The stock has a beta of 0.69 and a short float of 14.1% with 7.11 days to cover. Shares are down 3.9% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Charter Communications as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 2.4%. Since the same quarter one year prior, revenues rose by 12.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 69.04% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • Net operating cash flow has increased to $538.00 million or 14.95% when compared to the same quarter last year. Despite an increase in cash flow, CHARTER COMMUNICATIONS INC's average is still marginally south of the industry average growth rate of 15.30%.
  • The debt-to-equity ratio is very high at 234.52 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.20, which clearly demonstrates the inability to cover short-term cash needs.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Media industry and the overall market, CHARTER COMMUNICATIONS 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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