Watch Out: Barbarians At The Gate For Kellogg (K)

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 Kellogg ( K) 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 Kellogg as such a stock due to the following factors:

  • K has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $118.3 million.
  • K has traded 1.1 million shares today.
  • K traded in a range 206% of the normal price range with a price range of $1.57.
  • K traded above its daily resistance level (quality: 8 days, meaning that the stock is crossing a resistance level set by the last 8 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 K:

Kellogg Company, together with its subsidiaries, manufactures and markets ready-to-eat cereal and convenience food products primarily in the United States and the United Kingdom. The company operates through U.S. Morning Foods, U.S. Snacks, U.S. The stock currently has a dividend yield of 3%. K has a PE ratio of 13.7. Currently there are 2 analysts that rate Kellogg a buy, 4 analysts rate it a sell, and 6 rate it a hold.

The average volume for Kellogg has been 1.9 million shares per day over the past 30 days. Kellogg has a market cap of $23.4 billion and is part of the consumer goods sector and food & beverage industry. The stock has a beta of 0.93 and a short float of 2.5% with 3.77 days to cover. Shares are up 6.1% 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 Kellogg as a buy. The company's strengths can be seen in multiple areas, such as its notable return on equity, increase in stock price during the past year and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

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 Food Products industry and the overall market, KELLOGG CO's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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.
  • 41.28% is the gross profit margin for KELLOGG CO which we consider to be strong. Regardless of K's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 6.15% trails the industry average.
  • K, with its decline in revenue, slightly underperformed the industry average of 1.8%. Since the same quarter one year prior, revenues slightly dropped by 2.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • KELLOGG CO's earnings per share declined by 31.1% in the most recent quarter compared to 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, KELLOGG CO increased its bottom line by earning $4.95 versus $2.68 in the prior year. For the next year, the market is expecting a contraction of 21.0% in earnings ($3.91 versus $4.95).

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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