Guidewire Software (GWRE) 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 Guidewire Software ( GWRE) 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 Guidewire Software as such a stock due to the following factors:

  • GWRE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $20.6 million.
  • GWRE has traded 1.0 million shares today.
  • GWRE traded in a range 345.6% of the normal price range with a price range of $3.13.
  • GWRE traded above its daily resistance level (quality: 151 days, meaning that the stock is crossing a resistance level set by the last 151 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 GWRE:

Guidewire Software, Inc. provides system software to the property and casualty (P&C) insurance industry primarily in the United States, Canada, Australia, the United Kingdom, and internationally. GWRE has a PE ratio of 246.1. Currently there are 4 analysts that rate Guidewire Software a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Guidewire Software has been 623,400 shares per day over the past 30 days. Guidewire Software has a market cap of $3.1 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 1.89 and a short float of 7.4% with 12.35 days to cover. Shares are down 6.6% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Guidewire Software as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and increase in net income. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.

Highlights from the ratings report include:
  • GWRE's revenue growth has slightly outpaced the industry average of 11.5%. Since the same quarter one year prior, revenues rose by 20.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • GWRE has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 5.52, which clearly demonstrates the ability to cover short-term cash needs.
  • GUIDEWIRE SOFTWARE INC 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, GUIDEWIRE SOFTWARE INC reported lower earnings of $0.24 versus $0.29 in the prior year. This year, the market expects an improvement in earnings ($0.55 versus $0.24).
  • In its most recent trading session, GWRE has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
  • 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 Software industry and the overall market, GUIDEWIRE SOFTWARE INC's return on equity significantly trails that of both the industry average and the S&P 500.

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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