Trade-Ideas: Darden Restaurants (DRI) 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 Darden Restaurants ( DRI) 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 Darden Restaurants as such a stock due to the following factors:

  • DRI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $56.6 million.
  • DRI has traded 286,745 shares today.
  • DRI traded in a range 201.5% of the normal price range with a price range of $1.23.
  • DRI traded above its daily resistance level (quality: 74 days, meaning that the stock is crossing a resistance level set by the last 74 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 DRI:

Darden Restaurants, Inc. owns and operates full service restaurants in the United States and Canada. It operates restaurants under the Olive Garden, LongHorn Steakhouse, Bahama Breeze, Seasons 52, The Capital Grille, Eddie V's, and Yard House brand names. The stock currently has a dividend yield of 4.7%. DRI has a PE ratio of 34.3. Currently there are 6 analysts that rate Darden Restaurants a buy, 2 analysts rate it a sell, and 12 rate it a hold.

The average volume for Darden Restaurants has been 1.6 million shares per day over the past 30 days. Darden has a market cap of $6.3 billion and is part of the services sector and leisure industry. The stock has a beta of 1.05 and a short float of 10.3% with 13.06 days to cover. Shares are down 13% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

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

Highlights from the ratings report include:
  • DRI's revenue growth has slightly outpaced the industry average of 5.5%. Since the same quarter one year prior, revenues slightly increased by 3.6%. 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.
  • The gross profit margin for DARDEN RESTAURANTS INC is rather low; currently it is at 20.24%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 5.24% trails that of the industry average.
  • Net operating cash flow has significantly decreased to $103.40 million or 60.16% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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