Barbarian At The Gate: PacWest Bancorp (PACW)

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 PacWest Bancorp ( PACW) 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 PacWest Bancorp as such a stock due to the following factors:

  • PACW has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $25.7 million.
  • PACW has traded 881,666 shares today.
  • PACW traded in a range 234.1% of the normal price range with a price range of $2.25.
  • PACW traded above its daily resistance level (quality: 210 days, meaning that the stock is crossing a resistance level set by the last 210 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 PACW:

PacWest Bancorp operates as the holding company for Pacific Western Bank that provides commercial banking products and services to individuals, professionals, and small to mid-sized businesses in the United States. It accepts demand, money market, and time deposits. The stock currently has a dividend yield of 2.3%. PACW has a PE ratio of 34.8. Currently there are 6 analysts that rate PacWest Bancorp a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for PacWest Bancorp has been 538,800 shares per day over the past 30 days. PacWest has a market cap of $4.4 billion and is part of the financial sector and banking industry. The stock has a beta of 1.46 and a short float of 5% with 3.78 days to cover. Shares are up 0.7% 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 PacWest Bancorp as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income, expanding profit margins, increase in stock price during the past year and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • PACW's very impressive revenue growth greatly exceeded the industry average of 9.0%. Since the same quarter one year prior, revenues leaped by 142.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Commercial Banks industry. The net income increased by 157.7% when compared to the same quarter one year prior, rising from $24.16 million to $62.27 million.
  • The gross profit margin for PACWEST BANCORP is currently very high, coming in at 91.51%. Regardless of PACW's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PACW's net profit margin of 28.47% significantly outperformed against the industry.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • PACWEST BANCORP has improved earnings per share by 13.2% 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, PACWEST BANCORP reported lower earnings of $1.08 versus $1.53 in the prior year. This year, the market expects an improvement in earnings ($1.95 versus $1.08).

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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