Watch Out: Barbarians At The Gate For MeadWestvaco (MWV)

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 MeadWestvaco ( MWV) 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 MeadWestvaco as such a stock due to the following factors:

  • MWV has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $38.4 million.
  • MWV has traded 449,458 shares today.
  • MWV traded in a range 228.6% of the normal price range with a price range of $1.09.
  • MWV traded above its daily resistance level (quality: 6 days, meaning that the stock is crossing a resistance level set by the last 6 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 MWV:

MeadWestvaco Corporation provides packaging solutions to healthcare, beauty and personal care, food, beverage, home and garden, tobacco, and agricultural industries worldwide. The stock currently has a dividend yield of 2.4%. MWV has a PE ratio of 20.1. Currently there are 3 analysts that rate MeadWestvaco a buy, 2 analysts rate it a sell, and 1 rates it a hold.

The average volume for MeadWestvaco has been 894,500 shares per day over the past 30 days. MeadWestvaco has a market cap of $7.1 billion and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 0.88 and a short float of 4.8% with 2.32 days to cover. Shares are up 13.9% year-to-date as of the close of trading on Wednesday.

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 MeadWestvaco as a buy. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, revenue growth, largely solid financial position with reasonable debt levels by most measures, increase in net income and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • 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 5.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.53, 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.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Containers & Packaging industry average. The net income increased by 2.8% when compared to the same quarter one year prior, going from $71.00 million to $73.00 million.
  • MEADWESTVACO CORP 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, MEADWESTVACO CORP increased its bottom line by earning $1.78 versus $1.21 in the prior year. For the next year, the market is expecting a contraction of 0.8% in earnings ($1.77 versus $1.78).

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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