Trade-Ideas: KAR Auction Services (KAR) 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 KAR Auction Services ( KAR) 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 KAR Auction Services as such a stock due to the following factors:

  • KAR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $30.8 million.
  • KAR has traded 208,665 shares today.
  • KAR traded in a range 207.7% of the normal price range with a price range of $1.06.
  • KAR traded above its daily resistance level (quality: 6 days, meaning that the stock is crossing a resistance level set by the last 6 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 KAR:

KAR Auction Services, Inc., together with its subsidiaries, provides vehicle auction services in North America. It operates in three segments: ADESA Auctions, IAA, and AFC. The stock currently has a dividend yield of 3.5%. KAR has a PE ratio of 69.0. Currently there are 7 analysts that rate KAR Auction Services a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for KAR Auction Services has been 864,200 shares per day over the past 30 days. KAR Auction Services has a market cap of $4.1 billion and is part of the services sector and specialty retail industry. The stock has a beta of 1.86 and a short float of 1.1% with 1.41 days to cover. Shares are down 1.9% year-to-date as of the close of trading on Tuesday.

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 KAR Auction Services as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, expanding profit margins, reasonable valuation levels 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:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 5.6%. Since the same quarter one year prior, revenues slightly increased by 4.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has slightly increased to $92.30 million or 1.65% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -9.59%.
  • 44.42% is the gross profit margin for KAR AUCTION SERVICES INC which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, KAR's net profit margin of 3.54% significantly trails the industry average.
  • KAR AUCTION SERVICES INC's earnings per share declined by 28.6% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, KAR AUCTION SERVICES INC reported lower earnings of $0.48 versus $0.66 in the prior year. This year, the market expects an improvement in earnings ($1.42 versus $0.48).

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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