Barbarian At The Gate: KLA-Tencor (KLAC)

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 KLA-Tencor ( KLAC) 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 KLA-Tencor as such a stock due to the following factors:

  • KLAC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $91.7 million.
  • KLAC has traded 52,599 shares today.
  • KLAC traded in a range 241.8% of the normal price range with a price range of $2.32.
  • KLAC traded above its daily resistance level (quality: 27 days, meaning that the stock is crossing a resistance level set by the last 27 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 KLAC:

KLA-Tencor Corporation designs, manufactures, and markets process control and yield management solutions worldwide. The stock currently has a dividend yield of 2.7%. KLAC has a PE ratio of 21.4. Currently there are 7 analysts that rate KLA-Tencor a buy, 1 analyst rates it a sell, and 6 rate it a hold.

The average volume for KLA-Tencor has been 1.5 million shares per day over the past 30 days. KLA-Tencor has a market cap of $12.2 billion and is part of the technology sector and electronics industry. The stock has a beta of 1.32 and a short float of 4.2% with 4.22 days to cover. Shares are up 15.4% year-to-date as of the close of trading on Monday.

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 KLA-Tencor as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, solid stock price performance and notable return on equity. 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 9.0%. Since the same quarter one year prior, revenues slightly increased by 2.0%. 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.
  • KLAC's debt-to-equity ratio is very low at 0.20 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 4.10, which clearly demonstrates the ability to cover short-term cash needs.
  • Net operating cash flow has increased to $248.64 million or 41.61% when compared to the same quarter last year. In addition, KLA-TENCOR CORP has also vastly surpassed the industry average cash flow growth rate of -9.88%.
  • KLA-TENCOR CORP' earnings per share from the most recent quarter came in slightly below the year earlier 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, KLA-TENCOR CORP increased its bottom line by earning $3.47 versus $3.21 in the prior year. This year, the market expects an improvement in earnings ($3.90 versus $3.47).
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.

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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