Trade-Ideas: Lear (LEA) Is Today's

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

  • LEA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $53.7 million.
  • LEA has traded 166,428 shares today.
  • LEA traded in a range 207.2% of the normal price range with a price range of $2.49.
  • LEA traded above its daily resistance level (quality: 2 days, meaning that the stock is crossing a resistance level set by the last 2 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 LEA:

Lear Corporation designs, manufactures, assembles, and supplies automotive seating, electrical distribution systems, and related components primarily to automotive original equipment manufacturers worldwide. It operates through two segments, Seating and Electrical. The stock currently has a dividend yield of 0.9%. LEA has a PE ratio of 17.1. Currently there are 5 analysts that rate Lear a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Lear has been 679,600 shares per day over the past 30 days. Lear has a market cap of $7.4 billion and is part of the consumer goods sector and automotive industry. The stock has a beta of 1.15 and a short float of 1.2% with 1.61 days to cover. Shares are up 13% year-to-date as of the close of trading on Wednesday.

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 Lear as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, growth in earnings per share, increase in net income and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • LEA's revenue growth has slightly outpaced the industry average of 3.4%. Since the same quarter one year prior, revenues rose by 10.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 30.08% and other important driving factors, this stock has surged by 48.37% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, LEA should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • LEAR CORP has improved earnings per share by 30.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, LEAR CORP reported lower earnings of $4.99 versus $13.00 in the prior year. This year, the market expects an improvement in earnings ($7.65 versus $4.99).
  • The net income growth from the same quarter one year ago has exceeded that of the Auto Components industry average, but is less than that of the S&P 500. The net income increased by 12.4% when compared to the same quarter one year prior, going from $108.50 million to $122.00 million.
  • The current debt-to-equity ratio, 0.34, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.95 is somewhat weak and could be cause for future problems.

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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