Trade-Ideas: Aaron's (AAN) Is Today's

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 Aaron's ( AAN) 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 Aaron's as such a stock due to the following factors:

  • AAN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $63.6 million.
  • AAN has traded 775,941 shares today.
  • AAN traded in a range 430.9% of the normal price range with a price range of $1.94.
  • AAN traded above its daily resistance level (quality: 462 days, meaning that the stock is crossing a resistance level set by the last 462 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 AAN:

Aaron's, Inc. operates as a specialty retailer of consumer electronics, computers, residential furniture, household appliances, and accessories in the United States and Canada. The company operates in four segments: Sales and Lease Ownership, Franchise, HomeSmart, and Manufacturing. The stock currently has a dividend yield of 0.3%. AAN has a PE ratio of 17.4. Currently there are 3 analysts that rate Aaron's a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for Aaron's has been 982,500 shares per day over the past 30 days. Aaron's has a market cap of $2.1 billion and is part of the services sector and diversified services industry. Shares are down 8% year-to-date as of the close of trading on Thursday.

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 Aaron's 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, reasonable valuation levels, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 7.3%. Since the same quarter one year prior, revenues slightly increased by 1.9%. 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.
  • AAN's debt-to-equity ratio is very low at 0.11 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
  • Net operating cash flow has significantly increased by 221.15% to $128.17 million when compared to the same quarter last year. In addition, AARON'S INC has also vastly surpassed the industry average cash flow growth rate of 3.31%.
  • The gross profit margin for AARON'S INC is currently very high, coming in at 84.67%. 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 3.91% trails the industry average.

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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