Barbarian At The Gate: Emerson Electric (EMR)

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 Emerson Electric ( EMR) 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 Emerson Electric as such a stock due to the following factors:

  • EMR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $129.1 million.
  • EMR has traded 189,703 shares today.
  • EMR traded in a range 203.9% of the normal price range with a price range of $1.23.
  • EMR 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 EMR:

Emerson Electric Co., a diversified technology company, designs and supplies products and technology, and delivers engineering services and solutions to the industrial, commercial, and consumer markets worldwide. The stock currently has a dividend yield of 2.7%. EMR has a PE ratio of 18.0. Currently there are 6 analysts that rate Emerson Electric a buy, no analysts rate it a sell, and 9 rate it a hold.

The average volume for Emerson Electric has been 2.9 million shares per day over the past 30 days. Emerson Electric has a market cap of $44.7 billion and is part of the industrial goods sector and industrial industry. The stock has a beta of 1.26 and a short float of 1.2% with 3.84 days to cover. Shares are down 8.4% year-to-date as of the close of trading on Tuesday.

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 Emerson Electric as a buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, notable return on equity, expanding profit margins and good cash flow from operations. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:
  • EMERSON ELECTRIC CO reported significant earnings per share improvement 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, EMERSON ELECTRIC CO increased its bottom line by earning $2.76 versus $2.67 in the prior year. This year, the market expects an improvement in earnings ($3.70 versus $2.76).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Electrical Equipment industry. The net income increased by 275.3% when compared to the same quarter one year prior, rising from $194.00 million to $728.00 million.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Electrical Equipment industry and the overall market, EMERSON ELECTRIC CO's return on equity exceeds that of both the industry average and the S&P 500.
  • 44.15% is the gross profit margin for EMERSON ELECTRIC CO which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 11.53% is above that of the industry average.
  • Net operating cash flow has slightly increased to $1,018.00 million or 2.31% when compared to the same quarter last year. Despite an increase in cash flow, EMERSON ELECTRIC CO's average is still marginally south of the industry average growth rate of 3.06%.

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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