Trade-Ideas: Covenant Transportation Group (CVTI) Is Today's Strong And Under The Radar Stock

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 Covenant Transportation Group ( CVTI) as a strong and under the radar candidate. In addition to specific proprietary factors, Trade-Ideas identified Covenant Transportation Group as such a stock due to the following factors:

  • CVTI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $2.8 million.
  • CVTI is making at least a new 3-day high.
  • CVTI has a PE ratio of 32.8.
  • CVTI is mentioned 0.97 times per day on StockTwits.
  • CVTI has not yet been mentioned on StockTwits today.
  • CVTI is currently in the upper 20% of its 1-year range.
  • CVTI is in the upper 35% of its 20-day range.
  • CVTI is in the upper 45% of its 5-day range.
  • CVTI is currently trading above yesterday's high.

'Strong and Under the Radar' stocks tend to be worthwhile stocks to watch for a variety of factors including historical back testing and price action. Market technicians refer to such stocks as being in an accumulation phase before a mark-up and peak. Traders and hedge funds have frequently found that these types of stocks continue to build a solid price base and then ultimately spike higher and peak when others 'discover' how good the stock is performing. By leveraging the social discovery aspect of StockTwits we are highlighting stocks that don't currently receive much attention from retail investors, but we suspect may soon garner more attention.

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More details on CVTI:

Covenant Transportation Group, Inc., together with its subsidiaries, offers truckload transportation and brokerage services in the continental United States. Its Asset-Based Truckload Services segment provides long haul, dedicated, temperature-controlled, and regional solo-driver services. CVTI has a PE ratio of 32.8. Currently there are 2 analysts that rate Covenant Transportation Group a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Covenant Transportation Group has been 67,300 shares per day over the past 30 days. Covenant Transportation Group has a market cap of $210.7 million and is part of the services sector and transportation industry. The stock has a beta of 0.63 and a short float of 0.5% with 0.25 days to cover. Shares are up 103.5% year-to-date as of the close of trading on Thursday.

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 Covenant Transportation Group as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including poor profit margins and generally higher debt management risk.

Highlights from the ratings report include:
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Road & Rail industry. The net income increased by 99.9% when compared to the same quarter one year prior, rising from $1.89 million to $3.78 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.9%. Since the same quarter one year prior, revenues slightly increased by 0.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 92.30% and other important driving factors, this stock has surged by 175.45% over the past year, outperforming the rise in the S&P 500 Index during the same period. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
  • The debt-to-equity ratio is very high at 2.27 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, CVTI's quick ratio is somewhat strong at 1.01, demonstrating the ability to handle short-term liquidity needs.
  • The gross profit margin for COVENANT TRANSPORTATION GRP is currently extremely low, coming in at 11.72%. Regardless of CVTI's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, CVTI's net profit margin of 2.17% is significantly lower than the industry average.

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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