Storm The Castle Stock Of The Day: Sanderson Farms (SAFM)

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 Sanderson Farms ( SAFM) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Sanderson Farms as such a stock due to the following factors:

  • SAFM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $67.7 million.
  • SAFM has traded 153,008 shares today.
  • SAFM is trading at 2.34 times the normal volume for the stock at this time of day.
  • SAFM crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on SAFM:

Sanderson Farms, Inc., an integrated poultry processing company, produces, processes, markets, and distributes fresh, frozen, and prepared chicken products in the United States. The stock currently has a dividend yield of 1.1%. SAFM has a PE ratio of 9.6. Currently there are no analysts that rate Sanderson Farms a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for Sanderson Farms has been 613,400 shares per day over the past 30 days. Sanderson Farms has a market cap of $1.9 billion and is part of the consumer goods sector and food & beverage industry. The stock has a beta of 0.34 and a short float of 33.6% with 7.69 days to cover. Shares are up 17.4% year-to-date as of the close of trading on Monday.

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 Sanderson Farms as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, attractive valuation levels and solid stock price performance. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • SAFM's revenue growth has slightly outpaced the industry average of 1.5%. Since the same quarter one year prior, revenues slightly increased by 4.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • SAFM's debt-to-equity ratio is very low at 0.02 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.42, which illustrates the ability to avoid short-term cash problems.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Food Products industry and the overall market, SANDERSON FARMS INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 27.71% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, SAFM should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.

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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