Watch Out: Barbarians At The Gate For Visteon (VC)

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 Visteon ( VC) 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 Visteon as such a stock due to the following factors:

  • VC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $51.7 million.
  • VC has traded 351,561 shares today.
  • VC traded in a range 203.4% of the normal price range with a price range of $4.61.
  • VC traded above its daily resistance level (quality: 28 days, meaning that the stock is crossing a resistance level set by the last 28 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 VC:

Visteon Corporation provides climate, electronic and interior systems, modules, and components to automotive original equipment manufacturers worldwide. It operates in the Climate, Electronics, and Interiors segments. VC has a PE ratio of 8.2. Currently there are 4 analysts that rate Visteon a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Visteon has been 628,000 shares per day over the past 30 days. Visteon has a market cap of $4.1 billion and is part of the consumer goods sector and automotive industry. The stock has a beta of 1.02 and a short float of 4.7% with 4.24 days to cover. Shares are up 14.2% year-to-date as of the close of trading on Wednesday.

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 Visteon as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, solid stock price performance and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • VC's revenue growth has slightly outpaced the industry average of 8.9%. Since the same quarter one year prior, revenues rose by 10.7%. 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.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Auto Components industry and the overall market, VISTEON CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • VC's debt-to-equity ratio of 0.71 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.26 is sturdy.
  • VISTEON CORP 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. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, VISTEON CORP increased its bottom line by earning $13.74 versus $1.91 in the prior year. For the next year, the market is expecting a contraction of 75.1% in earnings ($3.42 versus $13.74).

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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