Barbarian At The Gate: Strayer Education (STRA)

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 Strayer Education ( STRA) 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 Strayer Education as such a stock due to the following factors:

  • STRA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $21.8 million.
  • STRA has traded 61,497 shares today.
  • STRA traded in a range 215.3% of the normal price range with a price range of $4.62.
  • STRA traded above its daily resistance level (quality: 215 days, meaning that the stock is crossing a resistance level set by the last 215 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 STRA:

Strayer Education, Inc., through its subsidiary, Strayer University, provides post-secondary education services for working adults. STRA has a PE ratio of 10.2. Currently there are no analysts that rate Strayer Education a buy, 6 analysts rate it a sell, and 4 rate it a hold.

The average volume for Strayer Education has been 263,100 shares per day over the past 30 days. Strayer has a market cap of $510.4 million and is part of the services sector and diversified services industry. The stock has a beta of 1.22 and a short float of 17.4% with 3.30 days to cover. Shares are up 37.1% year-to-date as of the close of trading on Monday.

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 Strayer Education as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, generally high debt management risk and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • STRAYER EDUCATION INC's earnings per share declined by 16.7% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, STRAYER EDUCATION INC reported lower earnings of $5.77 versus $8.83 in the prior year. For the next year, the market is expecting a contraction of 24.9% in earnings ($4.33 versus $5.77).
  • Looking at the price performance of STRA's shares over the past 12 months, there is not much good news to report: the stock is down 34.22%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • The debt-to-equity ratio is very high at 2.15 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Regardless of the company's weak debt-to-equity ratio, STRA has managed to keep a strong quick ratio of 2.46, which demonstrates the ability 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 Diversified Consumer Services industry and the overall market, STRAYER EDUCATION INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The change in net income from the same quarter one year ago has significantly exceeded that of the Diversified Consumer Services industry average, but is less than that of the S&P 500. The net income has decreased by 23.2% when compared to the same quarter one year ago, dropping from $4.10 million to $3.15 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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