Barbarian At The Gate: Dril-Quip (DRQ)

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 Dril-Quip ( DRQ) 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 Dril-Quip as such a stock due to the following factors:

  • DRQ has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $28.0 million.
  • DRQ has traded 50,387 shares today.
  • DRQ traded in a range 425.8% of the normal price range with a price range of $5.97.
  • DRQ traded above its daily resistance level (quality: 34 days, meaning that the stock is crossing a resistance level set by the last 34 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 DRQ:

Dril-Quip, Inc. designs, manufactures, sells, and services engineered offshore drilling and production equipment for use in deepwater, harsh environment, and severe service applications worldwide. DRQ has a PE ratio of 24.1. Currently there are 5 analysts that rate Dril-Quip a buy, 1 analyst rates it a sell, and 4 rate it a hold.

The average volume for Dril-Quip has been 355,100 shares per day over the past 30 days. Dril-Quip has a market cap of $4.1 billion and is part of the basic materials sector and energy industry. The stock has a beta of 1.31 and a short float of 1.8% with 3.91 days to cover. Shares are down 7.4% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Dril-Quip as a buy. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • DRIL-QUIP INC has improved earnings per share by 6.1% 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. During the past fiscal year, DRIL-QUIP INC increased its bottom line by earning $4.16 versus $2.94 in the prior year. This year, the market expects an improvement in earnings ($4.91 versus $4.16).
  • Despite its growing revenue, the company underperformed as compared with the industry average of 11.2%. Since the same quarter one year prior, revenues slightly increased by 5.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • DRQ has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 4.38, which clearly demonstrates the ability to cover short-term cash needs.
  • 49.48% is the gross profit margin for DRIL-QUIP INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 20.88% is above that of the industry average.
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.

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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Trade-Ideas: Dril-Quip (DRQ) Is Today's "Barbarian At The Gate" Stock