Barbarian At The Gate: EBay (EBAY)

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 eBay ( EBAY) 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 eBay as such a stock due to the following factors:

  • EBAY has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $536.5 million.
  • EBAY has traded 12.7 million shares today.
  • EBAY traded in a range 295.4% of the normal price range with a price range of $2.13.
  • EBAY traded above its daily resistance level (quality: 133 days, meaning that the stock is crossing a resistance level set by the last 133 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 EBAY:

eBay Inc. provides online platforms, tools, and services to help individuals and merchants in online and mobile commerce and payments in the United States and internationally. Currently there are 18 analysts that rate eBay a buy, no analysts rate it a sell, and 9 rate it a hold.

The average volume for eBay has been 11.8 million shares per day over the past 30 days. eBay has a market cap of $66.7 billion and is part of the services sector and specialty retail industry. The stock has a beta of 0.83 and a short float of 1.7% with 2.38 days to cover. Shares are down 2.7% 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 eBay as a buy. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • EBAY INC has improved earnings per share by 8.2% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, EBAY INC increased its bottom line by earning $2.18 versus $1.99 in the prior year. This year, the market expects an improvement in earnings ($2.97 versus $2.18).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Internet Software & Services industry average. The net income increased by 5.6% when compared to the same quarter one year prior, going from $640.00 million to $676.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 19.9%. Since the same quarter one year prior, revenues rose by 12.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Although EBAY's debt-to-equity ratio of 0.28 is very low, it is currently higher than that of the industry average. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.20, which illustrates the ability to avoid short-term cash problems.
  • Net operating cash flow has increased to $1,494.00 million or 47.77% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 17.67%.

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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