Watch Out: Barbarians At The Gate For Xerox Corporation (XRX)

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 Xerox Corporation ( XRX) 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 Xerox Corporation as such a stock due to the following factors:

  • XRX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $115.8 million.
  • XRX has traded 2.0 million shares today.
  • XRX traded in a range 247.1% of the normal price range with a price range of $0.59.
  • XRX traded above its daily resistance level (quality: 528 days, meaning that the stock is crossing a resistance level set by the last 528 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 XRX:

Xerox Corporation provides business process and document management solutions worldwide. The stock currently has a dividend yield of 2%. XRX has a PE ratio of 13.7. Currently there are 3 analysts that rate Xerox Corporation a buy, 2 analysts rate it a sell, and 2 rate it a hold.

The average volume for Xerox Corporation has been 7.9 million shares per day over the past 30 days. Xerox has a market cap of $14.9 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 1.61 and a short float of 1.5% with 1.85 days to cover. Shares are up 5.5% year-to-date as of the close of trading on Thursday.

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 Xerox Corporation as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, attractive valuation levels, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • Compared to its closing price of one year ago, XRX's share price has jumped by 32.19%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, XRX should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Net operating cash flow has significantly increased by 428.73% to $286.00 million when compared to the same quarter last year. In addition, XEROX CORP has also vastly surpassed the industry average cash flow growth rate of 2.40%.
  • XEROX CORP reported flat earnings per share in the most recent quarter. 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, XEROX CORP increased its bottom line by earning $0.93 versus $0.88 in the prior year. This year, the market expects an improvement in earnings ($1.10 versus $0.93).
  • The debt-to-equity ratio is somewhat low, currently at 0.64, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.98 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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