Watch Out: Barbarians At The Gate For CenterPoint Energy (CNP)

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 CenterPoint Energy ( CNP) 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 CenterPoint Energy as such a stock due to the following factors:

  • CNP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $99.9 million.
  • CNP has traded 3.5 million shares today.
  • CNP traded in a range 205.5% of the normal price range with a price range of $0.63.
  • CNP traded above its daily resistance level (quality: 8 days, meaning that the stock is crossing a resistance level set by the last 8 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 CNP:

CenterPoint Energy, Inc. operates as a public utility holding company in the United States. The stock currently has a dividend yield of 4%. CNP has a PE ratio of 18.5. Currently there are 5 analysts that rate CenterPoint Energy a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for CenterPoint Energy has been 3.1 million shares per day over the past 30 days. CenterPoint Energy has a market cap of $10.3 billion and is part of the utilities sector and utilities industry. The stock has a beta of 0.50 and a short float of 2.5% with 2.40 days to cover. Shares are up 3.3% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates CenterPoint Energy as a buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, good cash flow from operations, impressive record of earnings per share growth, notable return on equity and reasonable valuation levels. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

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 Multi-Utilities industry. The net income increased by 207.0% when compared to the same quarter one year prior, rising from -$100.00 million to $107.00 million.
  • Net operating cash flow has increased to $332.00 million or 29.18% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -13.18%.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Multi-Utilities industry and the overall market on the basis of return on equity, CENTERPOINT ENERGY INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • CENTERPOINT ENERGY 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, CENTERPOINT ENERGY INC reported lower earnings of $0.72 versus $0.96 in the prior year. This year, the market expects an improvement in earnings ($1.17 versus $0.72).
  • CNP, with its decline in revenue, slightly underperformed the industry average of 7.2%. Since the same quarter one year prior, revenues slightly dropped by 0.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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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