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 ADT ( ADT) 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 ADT as such a stock due to the following factors:
- ADT has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $71.2 million.
- ADT has traded 333,740 shares today.
- ADT traded in a range 205.4% of the normal price range with a price range of $1.51.
- ADT traded above its daily resistance level (quality: 89 days, meaning that the stock is crossing a resistance level set by the last 89 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. EXCLUSIVE OFFER: Get the inside scoop on opportunities in ADT with the Ticky from Trade-Ideas. See the FREE profile for ADT NOW at Trade-Ideas More details on ADT: The ADT Corporation provides electronic security, interactive home and business automation, and related monitoring services under the ADT, ADT Pulse, and Companion Service brands to residential and small business customers in the United States and Canada. The stock currently has a dividend yield of 2.8%. ADT has a PE ratio of 15.8. Currently there are 2 analysts that rate ADT a buy, no analysts rate it a sell, and 5 rate it a hold. The average volume for ADT has been 4.7 million shares per day over the past 30 days. ADT has a market cap of $5.4 billion and is part of the services sector and diversified services industry. Shares are down 28.1% 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 ADT as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, generally high debt management risk, weak operating cash flow and generally disappointing historical performance in the stock itself. Highlights from the ratings report include:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Commercial Services & Supplies industry. The net income has significantly decreased by 26.7% when compared to the same quarter one year ago, falling from $105.00 million to $77.00 million.
- The debt-to-equity ratio of 1.36 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.26, which clearly demonstrates the inability to cover short-term cash needs.
- Net operating cash flow has decreased to $335.00 million or 18.09% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- Looking at the price performance of ADT's shares over the past 12 months, there is not much good news to report: the stock is down 31.78%, 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. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- The gross profit margin for ADT CORP is currently very high, coming in at 86.53%. ADT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, ADT's net profit margin of 9.17% compares favorably to the industry average.
- You can view the full ADT Ratings Report.
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.