Barbarian At The Gate: Deere (DE)

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 Deere ( DE) 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 Deere as such a stock due to the following factors:

  • DE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $257.4 million.
  • DE has traded 3.7 million shares today.
  • DE traded in a range 204.4% of the normal price range with a price range of $2.57.
  • DE traded above its daily resistance level (quality: 83 days, meaning that the stock is crossing a resistance level set by the last 83 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 DE:

Deere & Company, together with its subsidiaries, manufactures and distributes agriculture and turf, and construction and forestry equipment worldwide. The stock currently has a dividend yield of 2.3%. DE has a PE ratio of 9.5. Currently there are 3 analysts that rate Deere a buy, 7 analysts rate it a sell, and 9 rate it a hold.

The average volume for Deere has been 3.0 million shares per day over the past 30 days. Deere has a market cap of $32.5 billion and is part of the industrial goods sector and industrial industry. The stock has a beta of 1.25 and a short float of 4.6% with 6.04 days to cover. Shares are down 2.8% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Deere as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, increase in net income, growth in earnings per share and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 17.1%. Since the same quarter one year prior, revenues slightly increased by 3.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Net operating cash flow has increased to -$746.20 million or 40.27% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 27.22%.
  • The net income growth from the same quarter one year ago has exceeded that of the Machinery industry average, but is less than that of the S&P 500. The net income increased by 4.8% when compared to the same quarter one year prior, going from $649.70 million to $681.10 million.
  • DEERE & CO has improved earnings per share by 9.7% 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, DEERE & CO increased its bottom line by earning $9.08 versus $7.64 in the prior year. For the next year, the market is expecting a contraction of 6.4% in earnings ($8.50 versus $9.08).
  • In its most recent trading session, DE has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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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