Watch Out: Barbarians At The Gate For Group 1 Automotive (GPI)

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 Group 1 Automotive ( GPI) 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 Group 1 Automotive as such a stock due to the following factors:

  • GPI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $23.8 million.
  • GPI has traded 240,307 shares today.
  • GPI traded in a range 251.7% of the normal price range with a price range of $3.95.
  • GPI traded above its daily resistance level (quality: 14 days, meaning that the stock is crossing a resistance level set by the last 14 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 GPI:

Group 1 Automotive, Inc., through its subsidiaries, operates in the automotive retail industry. The stock currently has a dividend yield of 0.9%. GPI has a PE ratio of 19.8. Currently there are 3 analysts that rate Group 1 Automotive a buy, 1 analyst rates it a sell, and 2 rate it a hold.

The average volume for Group 1 Automotive has been 355,100 shares per day over the past 30 days. Group 1 Automotive has a market cap of $1.8 billion and is part of the services sector and specialty retail industry. The stock has a beta of 1.54 and a short float of 15.1% with 10.49 days to cover. Shares are up 7% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Group 1 Automotive as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth and reasonable valuation levels. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • GPI's revenue growth has slightly outpaced the industry average of 0.3%. Since the same quarter one year prior, revenues slightly increased by 7.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • GROUP 1 AUTOMOTIVE INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, GROUP 1 AUTOMOTIVE INC increased its bottom line by earning $4.31 versus $4.19 in the prior year. This year, the market expects an improvement in earnings ($5.50 versus $4.31).
  • The gross profit margin for GROUP 1 AUTOMOTIVE INC is currently extremely low, coming in at 14.70%. Regardless of GPI's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 0.67% trails the industry average.
  • In its most recent trading session, GPI 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. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

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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