Watch Out: Barbarians At The Gate For Linear Technology (LLTC)

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 Linear Technology ( LLTC) 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 Linear Technology as such a stock due to the following factors:

  • LLTC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $57.8 million.
  • LLTC has traded 1.2 million shares today.
  • LLTC traded in a range 204.2% of the normal price range with a price range of $1.33.
  • LLTC traded above its daily resistance level (quality: 67 days, meaning that the stock is crossing a resistance level set by the last 67 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 LLTC:

Linear Technology Corporation, together with its subsidiaries, designs, manufactures, and markets a line of analog integrated circuits (ICs) worldwide. The stock currently has a dividend yield of 2.4%. LLTC has a PE ratio of 22.5. Currently there are 8 analysts that rate Linear Technology a buy, 2 analysts rate it a sell, and 6 rate it a hold.

The average volume for Linear Technology has been 2.7 million shares per day over the past 30 days. Linear Technology has a market cap of $10.6 billion and is part of the technology sector and electronics industry. The stock has a beta of 1.36 and a short float of 5% with 9.46 days to cover. Shares are down 2.7% 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 Linear Technology as a buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and good cash flow from operations. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:
  • LINEAR TECHNOLOGY CORP has improved earnings per share by 17.8% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, LINEAR TECHNOLOGY CORP increased its bottom line by earning $1.90 versus $1.72 in the prior year. This year, the market expects an improvement in earnings ($2.09 versus $1.90).
  • Despite its growing revenue, the company underperformed as compared with the industry average of 18.6%. Since the same quarter one year prior, revenues slightly increased by 9.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • LLTC has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 6.04, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for LINEAR TECHNOLOGY CORP is currently very high, coming in at 79.57%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 34.88% significantly outperformed against the industry average.
  • Net operating cash flow has increased to $136.38 million or 10.22% when compared to the same quarter last year. Despite an increase in cash flow, LINEAR TECHNOLOGY CORP's average is still marginally south of the industry average growth rate of 11.67%.

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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