Watch Out: Barbarians At The Gate For SLM (SLM)

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

  • SLM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $118.9 million.
  • SLM has traded 278,105 shares today.
  • SLM traded in a range 217.8% of the normal price range with a price range of $1.19.
  • SLM traded above its daily resistance level (quality: 90 days, meaning that the stock is crossing a resistance level set by the last 90 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 SLM:

SLM Corporation, also known as Sallie Mae, originates, acquires, finances, and services private education loans to parents and graduate students in the United States. The stock currently has a dividend yield of 2.4%. SLM has a PE ratio of 8.7. Currently there are 4 analysts that rate SLM a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for SLM has been 4.8 million shares per day over the past 30 days. SLM has a market cap of $10.7 billion and is part of the financial sector and financial services industry. Shares are down 2.9% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates SLM as a buy. The company's strengths can be seen in multiple areas, such as its notable return on equity, attractive valuation levels, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Consumer Finance industry and the overall market, SLM CORP's return on equity exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for SLM CORP is currently very high, coming in at 72.15%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 17.50% is above that of the industry average.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. 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.
  • SLM, with its decline in revenue, underperformed when compared the industry average of 4.5%. Since the same quarter one year prior, revenues slightly dropped by 6.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

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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