Trade-Ideas: Mohawk Industries (MHK) 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 Mohawk Industries ( MHK) 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 Mohawk Industries as such a stock due to the following factors:

  • MHK has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $134.7 million.
  • MHK has traded 1.2 million shares today.
  • MHK traded in a range 231.1% of the normal price range with a price range of $7.83.
  • MHK traded above its daily resistance level (quality: 2 days, meaning that the stock is crossing a resistance level set by the last 2 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 MHK:

Mohawk Industries, Inc., together with its subsidiaries, produces floor covering products for residential and commercial applications in the United States and for residential applications in Europe. The company operates through three segments: Mohawk, Dal-Tile, and Unilin. MHK has a PE ratio of 31.9. Currently there are 7 analysts that rate Mohawk Industries a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Mohawk Industries has been 937,700 shares per day over the past 30 days. Mohawk has a market cap of $10.5 billion and is part of the industrial goods sector and industrial industry. The stock has a beta of 1.32 and a short float of 3.6% with 1.86 days to cover. Shares are down 3.3% 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 Mohawk Industries as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, compelling growth in net income, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • MHK's revenue growth has slightly outpaced the industry average of 29.1%. Since the same quarter one year prior, revenues rose by 33.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • MOHAWK INDUSTRIES INC reported significant earnings per share improvement 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, MOHAWK INDUSTRIES INC increased its bottom line by earning $3.60 versus $2.52 in the prior year. This year, the market expects an improvement in earnings ($6.50 versus $3.60).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Household Durables industry. The net income increased by 69.4% when compared to the same quarter one year prior, rising from $70.30 million to $119.07 million.
  • Powered by its strong earnings growth of 62.37% and other important driving factors, this stock has surged by 35.42% over the past year, outperforming the rise in the S&P 500 Index during the same period. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • Net operating cash flow has slightly increased to $213.06 million or 4.97% when compared to the same quarter last year. Despite an increase in cash flow, MOHAWK INDUSTRIES INC's cash flow growth rate is still lower than the industry average growth rate of 25.91%.

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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