Watch Out: Barbarians At The Gate For Lithia Motors (LAD)

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 Lithia Motors ( LAD) 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 Lithia Motors as such a stock due to the following factors:

  • LAD has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $26.7 million.
  • LAD has traded 209,633 shares today.
  • LAD traded in a range 205.3% of the normal price range with a price range of $4.35.
  • LAD traded above its daily resistance level (quality: 35 days, meaning that the stock is crossing a resistance level set by the last 35 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 LAD:

Lithia Motors, Inc. operates as an automotive franchisee and retailer of new and used vehicles in the United States. The stock currently has a dividend yield of 0.9%. LAD has a PE ratio of 15.7. Currently there are 6 analysts that rate Lithia Motors a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Lithia Motors has been 287,600 shares per day over the past 30 days. Lithia has a market cap of $1.4 billion and is part of the services sector and specialty retail industry. The stock has a beta of 2.39 and a short float of 4.2% with 2.21 days to cover. Shares are down 15% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Lithia Motors as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, impressive record of earnings per share growth, compelling growth in net income and reasonable valuation levels. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 6.8%. Since the same quarter one year prior, revenues rose by 21.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 31.11% and other important driving factors, this stock has surged by 34.97% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, LAD should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • LITHIA MOTORS INC has improved earnings per share by 31.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, LITHIA MOTORS INC increased its bottom line by earning $3.05 versus $2.07 in the prior year. This year, the market expects an improvement in earnings ($3.91 versus $3.05).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Specialty Retail industry average. The net income increased by 33.5% when compared to the same quarter one year prior, rising from $23.24 million to $31.02 million.

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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