Conn's (CONN) Marked As A Barbarian At The Gate

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 Conn's ( CONN) 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 Conn's as such a stock due to the following factors:

  • CONN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $55.2 million.
  • CONN has traded 2.8 million shares today.
  • CONN traded in a range 243.4% of the normal price range with a price range of $3.19.
  • CONN 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 CONN:

Conn's, Inc. is engaged in the specialty retail of durable consumer products in the United States. CONN has a PE ratio of 20.1. Currently there are 5 analysts that rate Conn's a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Conn's has been 1.8 million shares per day over the past 30 days. Conn's has a market cap of $1.2 billion and is part of the services sector and retail industry. The stock has a beta of 0.74 and a short float of 27.4% with 5.26 days to cover. Shares are down 56.1% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Conn's as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and weak operating cash flow.

Highlights from the ratings report include:
  • CONN's very impressive revenue growth greatly exceeded the industry average of 7.2%. Since the same quarter one year prior, revenues leaped by 50.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • CONN'S 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. This trend suggests that the performance of the business is improving. During the past fiscal year, CONN'S INC turned its bottom line around by earning $1.55 versus -$0.12 in the prior year. This year, the market expects an improvement in earnings ($2.62 versus $1.55).
  • CONN'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 3.12 is very high and demonstrates very strong liquidity.
  • Net operating cash flow has significantly decreased to -$70.51 million or 854.78% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • CONN has underperformed the S&P 500 Index, declining 9.69% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.

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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