Watch Out: Barbarians At The Gate For POSCO (PKX)

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 POSCO ( PKX) 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 POSCO as such a stock due to the following factors:

  • PKX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $20.2 million.
  • PKX has traded 197,894 shares today.
  • PKX traded in a range 237% of the normal price range with a price range of $3.13.
  • PKX traded above its daily resistance level (quality: 529 days, meaning that the stock is crossing a resistance level set by the last 529 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 PKX:

POSCO, together with its subsidiaries, manufactures and sells steel rolled products and plates. It operates through four segments: Steel, Trading, Construction, and Others. The stock currently has a dividend yield of 2%. PKX has a PE ratio of 0.0. Currently there is 1 analyst that rates POSCO a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for POSCO has been 212,400 shares per day over the past 30 days. POSCO has a market cap of $25.1 billion and is part of the basic materials sector and metals & mining industry. Shares are up 1.5% year-to-date as of the close of trading on Tuesday.

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TheStreet Quant Ratings rates POSCO as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including poor profit margins and disappointing return on equity.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 1.1%. Since the same quarter one year prior, revenues rose by 29.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, POSCO has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • The gross profit margin for POSCO is currently extremely low, coming in at 3.36%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 2.94% significantly trails the industry average.


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