Watch Out: Barbarians At The Gate For Carter's (CRI)

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 Carter's ( CRI) 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 Carter's as such a stock due to the following factors:

  • CRI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $47.6 million.
  • CRI has traded 222,914 shares today.
  • CRI traded in a range 233.5% of the normal price range with a price range of $2.35.
  • CRI traded above its daily resistance level (quality: 40 days, meaning that the stock is crossing a resistance level set by the last 40 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 CRI:

Carter's, Inc., together with its subsidiaries, designs, sources, and markets branded children's wear. The company provides its products under the Carter's, Child of Mine, Just One You, Precious Firsts, OshKosh, and other brands. The stock currently has a dividend yield of 0.9%. CRI has a PE ratio of 24.4. Currently there are 3 analysts that rate Carter's a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Carter's has been 608,400 shares per day over the past 30 days. Carter's has a market cap of $3.7 billion and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 0.86 and a short float of 4.9% with 4.28 days to cover. Shares are down 4.2% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Carter's as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, expanding profit margins, increase in stock price during the past year and largely solid financial position with reasonable debt levels by most measures. 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 17.0%. Since the same quarter one year prior, revenues rose by 13.5%. 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.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Textiles, Apparel & Luxury Goods industry and the overall market, CARTER'S INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • CARTER'S INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CARTER'S INC increased its bottom line by earning $2.69 versus $1.94 in the prior year. This year, the market expects an improvement in earnings ($3.35 versus $2.69).
  • 43.81% is the gross profit margin for CARTER'S INC which we consider to be strong. 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 7.33% trails the industry average.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.

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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