Barbarian At The Gate: Advisory Board (ABCO)

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 Advisory Board ( ABCO) 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 Advisory Board as such a stock due to the following factors:

  • ABCO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $31.0 million.
  • ABCO has traded 258,459 shares today.
  • ABCO traded in a range 243.3% of the normal price range with a price range of $4.37.
  • ABCO traded above its daily resistance level (quality: 38 days, meaning that the stock is crossing a resistance level set by the last 38 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 ABCO:

The Advisory Board Company provides best practices research and analysis, business intelligence and performance technology software, and consulting and management services to the health care and education industries in the United States and internationally. ABCO has a PE ratio of 92.1. Currently there are 10 analysts that rate Advisory Board a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Advisory Board has been 353,700 shares per day over the past 30 days. Advisory Board has a market cap of $1.4 billion and is part of the services sector and diversified services industry. The stock has a beta of 0.82 and a short float of 8.5% with 4.25 days to cover. Shares are down 30% year-to-date as of the close of trading on Thursday.

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 Advisory Board 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 a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:
  • ABCO's revenue growth has slightly outpaced the industry average of 5.7%. Since the same quarter one year prior, revenues rose by 12.4%. 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.
  • 48.36% is the gross profit margin for ADVISORY BOARD CO which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 4.50% trails the industry average.
  • ABCO 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. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.93 is somewhat weak and could be cause for future problems.
  • Net operating cash flow has significantly decreased to $17.36 million or 55.68% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Looking at the price performance of ABCO's shares over the past 12 months, there is not much good news to report: the stock is down 27.24%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, ABCO is still more expensive than most of the other companies in its industry.

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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