Barbarian At The Gate: Outerwall (OUTR)

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 Outerwall ( OUTR) 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 Outerwall as such a stock due to the following factors:

  • OUTR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $20.2 million.
  • OUTR has traded 2.9 million shares today.
  • OUTR traded in a range 466.9% of the normal price range with a price range of $7.29.
  • OUTR traded above its daily resistance level (quality: 180 days, meaning that the stock is crossing a resistance level set by the last 180 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 OUTR:

Outerwall Inc., through its subsidiaries, provides automated retail solutions primarily in the United States, Canada, Puerto Rico, Ireland, and the United Kingdom. OUTR has a PE ratio of 14.1. Currently there are 6 analysts that rate Outerwall a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for Outerwall has been 498,400 shares per day over the past 30 days. Outerwall has a market cap of $1.2 billion and is part of the services sector and specialty retail industry. The stock has a beta of 1.05 and a short float of 44.1% with 24.82 days to cover. Shares are down 5.5% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Outerwall as a hold. Among the primary strengths of the company is its respectable return on equity which we feel is likely to continue. At the same time, however, we also find weaknesses including deteriorating net income, generally higher debt management risk and poor profit margins.

Highlights from the ratings report include:
  • 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 Specialty Retail industry and the overall market, OUTERWALL INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • OUTR, with its decline in revenue, underperformed when compared the industry average of 9.6%. Since the same quarter one year prior, revenues slightly dropped by 5.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • OUTERWALL INC 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, OUTERWALL INC increased its bottom line by earning $7.39 versus $4.65 in the prior year. For the next year, the market is expecting a contraction of 17.3% in earnings ($6.12 versus $7.39).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Specialty Retail industry. The net income has significantly decreased by 78.3% when compared to the same quarter one year ago, falling from $82.66 million to $17.89 million.
  • The debt-to-equity ratio is very high at 21.13 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, OUTR has a quick ratio of 0.54, this demonstrates the lack of ability of the company to cover short-term liquidity needs.

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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