Watch Out: Barbarians At The Gate For Sonoco Products (SON)

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 Sonoco Products ( SON) 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 Sonoco Products as such a stock due to the following factors:

  • SON has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $20.8 million.
  • SON has traded 875,235 shares today.
  • SON traded in a range 234.9% of the normal price range with a price range of $1.14.
  • SON traded above its daily resistance level (quality: 48 days, meaning that the stock is crossing a resistance level set by the last 48 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 SON:

Sonoco Products Company manufactures and sells industrial and consumer packaging products in the United States, Europe, and Canada. The company operates in four segments: Consumer Packaging, Paper and Industrial Converted Products, Display and Packaging, and Protective Solutions. The stock currently has a dividend yield of 3.1%. SON has a PE ratio of 18.6. Currently there are 2 analysts that rate Sonoco Products a buy, 1 analyst rates it a sell, and 7 rate it a hold.

The average volume for Sonoco Products has been 422,500 shares per day over the past 30 days. Sonoco has a market cap of $4.2 billion and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 1.04 and a short float of 2% with 3.41 days to cover. Shares are down 1.7% year-to-date as of the close of trading on Monday.

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 Sonoco Products as a buy. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • SONOCO PRODUCTS CO has improved earnings per share by 11.3% 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, SONOCO PRODUCTS CO increased its bottom line by earning $2.12 versus $1.91 in the prior year. This year, the market expects an improvement in earnings ($2.48 versus $2.12).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Containers & Packaging industry average. The net income increased by 11.8% when compared to the same quarter one year prior, going from $54.99 million to $61.48 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.3%. Since the same quarter one year prior, revenues slightly increased by 1.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The current debt-to-equity ratio, 0.60, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.01, which illustrates the ability to avoid short-term cash problems.
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.

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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