Broadcom (BRCM) Marked As A Barbarian At The Gate

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 Broadcom ( BRCM) 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 Broadcom as such a stock due to the following factors:

  • BRCM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $149.9 million.
  • BRCM has traded 2.3 million shares today.
  • BRCM traded in a range 213.3% of the normal price range with a price range of $1.08.
  • BRCM traded above its daily resistance level (quality: 35 days, meaning that the stock is crossing a resistance level set by the last 35 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 BRCM:

Broadcom Corporation provides semiconductor solutions for wired and wireless communications. Its products offer voice, video, data, and multimedia connectivity in the home, office, and mobile environments. The stock currently has a dividend yield of 1.2%. BRCM has a PE ratio of 35.0. Currently there are 22 analysts that rate Broadcom a buy, 1 analyst rates it a sell, and 7 rate it a hold.

The average volume for Broadcom has been 8.2 million shares per day over the past 30 days. Broadcom has a market cap of $21.0 billion and is part of the technology sector and electronics industry. The stock has a beta of 0.97 and a short float of 2.1% with 2.75 days to cover. Shares are up 29.9% 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 Broadcom as a buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, largely solid financial position with reasonable debt levels by most measures, expanding profit margins, solid stock price performance and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 99.6% when compared to the same quarter one year prior, rising from -$251.00 million to -$1.00 million.
  • BRCM's debt-to-equity ratio is very low at 0.16 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, BRCM has a quick ratio of 2.46, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The gross profit margin for BROADCOM CORP is rather high; currently it is at 55.37%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -0.04% is in-line with the industry average.
  • Powered by its strong earnings growth of 100.00% and other important driving factors, this stock has surged by 55.58% over the past year, outperforming the rise in the S&P 500 Index during the same period. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • BROADCOM CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. 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, BROADCOM CORP reported lower earnings of $0.74 versus $1.24 in the prior year. This year, the market expects an improvement in earnings ($2.83 versus $0.74).

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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