Watch Out: Barbarians At The Gate For Potash Corp Of Saskatchewan (POT)

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 Potash Corp of Saskatchewan ( POT) 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 Potash Corp of Saskatchewan as such a stock due to the following factors:

  • POT has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $101.6 million.
  • POT has traded 1.4 million shares today.
  • POT traded in a range 210.2% of the normal price range with a price range of $1.21.
  • POT traded above its daily resistance level (quality: 59 days, meaning that the stock is crossing a resistance level set by the last 59 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 POT:

Potash Corporation of Saskatchewan Inc., together with its subsidiaries, produces and sells fertilizers and related industrial and feed products worldwide. It mines and produces potash, which is primarily used as fertilizer. The stock currently has a dividend yield of 4.2%. POT has a PE ratio of 21.0. Currently there are 4 analysts that rate Potash Corp of Saskatchewan a buy, 2 analysts rate it a sell, and 11 rate it a hold.

The average volume for Potash Corp of Saskatchewan has been 4.2 million shares per day over the past 30 days. Potash Corp of Saskatchewan has a market cap of $27.9 billion and is part of the basic materials sector and chemicals industry. The stock has a beta of 0.81 and a short float of 2% with 5.91 days to cover. Shares are up 2.5% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Potash Corp of Saskatchewan as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and weak operating cash flow.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.8%. Since the same quarter one year prior, revenues slightly increased by 8.0%. 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.
  • 42.54% is the gross profit margin for POTASH CORP SASK INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 19.31% significantly outperformed against the industry average.
  • The current debt-to-equity ratio, 0.48, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.49 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Chemicals industry average. The net income has decreased by 10.9% when compared to the same quarter one year ago, dropping from $356.00 million to $317.00 million.
  • Net operating cash flow has declined marginally to $574.00 million or 6.81% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

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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