Watch Out: Barbarians At The Gate For SunEdison (SUNE)

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 SunEdison ( SUNE) 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 SunEdison as such a stock due to the following factors:

  • SUNE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $186.8 million.
  • SUNE has traded 10.4 million shares today.
  • SUNE traded in a range 253% of the normal price range with a price range of $1.89.
  • SUNE traded above its daily resistance level (quality: 5 days, meaning that the stock is crossing a resistance level set by the last 5 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 SUNE:

SunEdison, Inc. develops, manufactures, and sells silicon wafers to the semiconductor industry. The company operates through two segments, Solar Energy and Semiconductor Materials. Currently there are 7 analysts that rate SunEdison a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for SunEdison has been 10.8 million shares per day over the past 30 days. SunEdison has a market cap of $5.2 billion and is part of the technology sector and electronics industry. The stock has a beta of 3.77 and a short float of 27.3% with 7.28 days to cover. Shares are up 47.9% 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 SunEdison as a sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:
  • The debt-to-equity ratio is very high at 15.07 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, SUNE maintains a poor quick ratio of 0.72, which illustrates the inability to avoid short-term cash problems.
  • 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 Semiconductors & Semiconductor Equipment industry and the overall market, SUNEDISON INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for SUNEDISON INC is rather low; currently it is at 18.20%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -6.37% is significantly below that of the industry average.
  • SUNEDISON INC reported significant earnings per share improvement in the most recent quarter compared to 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, SUNEDISON INC reported poor results of -$2.39 versus -$0.65 in the prior year. This year, the market expects an improvement in earnings (-$0.65 versus -$2.39).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 60.7% when compared to the same quarter one year prior, rising from -$104.90 million to -$41.20 million.

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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