Barbarian At The Gate: Mead Johnson Nutrition (MJN)

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 Mead Johnson Nutrition ( MJN) 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 Mead Johnson Nutrition as such a stock due to the following factors:

  • MJN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $94.7 million.
  • MJN has traded 817,192 shares today.
  • MJN traded in a range 224.9% of the normal price range with a price range of $2.49.
  • MJN traded above its daily resistance level (quality: 43 days, meaning that the stock is crossing a resistance level set by the last 43 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 MJN:

Mead Johnson Nutrition Company manufactures, distributes, and sells infant formulas, children's nutrition, and other nutritional products. The stock currently has a dividend yield of 1.6%. MJN has a PE ratio of 29.3. Currently there are 6 analysts that rate Mead Johnson Nutrition a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Mead Johnson Nutrition has been 1.2 million shares per day over the past 30 days. Mead Johnson Nutrition has a market cap of $19.3 billion and is part of the consumer goods sector and food & beverage industry. The stock has a beta of 0.83 and a short float of 1.3% with 3.65 days to cover. Shares are up 12.1% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Mead Johnson Nutrition as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • MJN's revenue growth has slightly outpaced the industry average of 2.7%. Since the same quarter one year prior, revenues slightly increased by 5.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • MEAD JOHNSON NUTRITION CO reported flat earnings per share in the most recent quarter. 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, MEAD JOHNSON NUTRITION CO increased its bottom line by earning $3.30 versus $2.96 in the prior year. This year, the market expects an improvement in earnings ($3.72 versus $3.30).
  • Compared to its closing price of one year ago, MJN's share price has jumped by 28.27%, exceeding the performance of the broader market during that same time frame. 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.
  • The gross profit margin for MEAD JOHNSON NUTRITION CO is rather high; currently it is at 63.81%. Regardless of MJN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MJN's net profit margin of 15.42% compares favorably to the industry average.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Food Products industry and the overall market, MEAD JOHNSON NUTRITION CO's return on equity significantly exceeds that of both the industry average and the S&P 500.

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