Watch Out: Barbarians At The Gate For EchoStar (SATS)

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 EchoStar ( SATS) 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 EchoStar as such a stock due to the following factors:

  • SATS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $20.2 million.
  • SATS has traded 149,466 shares today.
  • SATS traded in a range 207.9% of the normal price range with a price range of $2.51.
  • SATS traded above its daily resistance level (quality: 39 days, meaning that the stock is crossing a resistance level set by the last 39 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 SATS:

EchoStar Corporation provides satellite operations, video delivery solutions, and broadband satellite technologies and services for home and office in North America and internationally. The company operates in three segments: EchoStar Technologies, Hughes, and EchoStar Satellite Services. SATS has a PE ratio of 177.4. Currently there are 4 analysts that rate EchoStar a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for EchoStar has been 214,800 shares per day over the past 30 days. EchoStar has a market cap of $2.0 billion and is part of the technology sector and telecommunications industry. The stock has a beta of 1.60 and a short float of 0.4% with 0.33 days to cover. Shares are down 6.5% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates EchoStar as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • SATS's revenue growth has slightly outpaced the industry average of 3.6%. Since the same quarter one year prior, revenues rose by 11.0%. 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.
  • Net operating cash flow has increased to $198.07 million or 19.67% when compared to the same quarter last year. In addition, ECHOSTAR CORP has also modestly surpassed the industry average cash flow growth rate of 19.31%.
  • SATS's debt-to-equity ratio of 0.76 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 3.82 is very high and demonstrates very strong liquidity.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • ECHOSTAR CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ECHOSTAR CORP increased its bottom line by earning $2.41 versus $0.03 in the prior year. For the next year, the market is expecting a contraction of 105.2% in earnings (-$0.13 versus $2.41).

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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