Barbarian At The Gate: Aflac (AFL)

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 Aflac ( AFL) 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 Aflac as such a stock due to the following factors:

  • AFL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $127.7 million.
  • AFL has traded 1.1 million shares today.
  • AFL traded in a range 210.8% of the normal price range with a price range of $1.48.
  • AFL traded above its daily resistance level (quality: 3 days, meaning that the stock is crossing a resistance level set by the last 3 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 AFL:

Aflac Incorporated, through its subsidiary, American Family Life Assurance Company of Columbus, provides supplemental health and life insurance products. It operates through two segments, Aflac Japan and Aflac U.S. The stock currently has a dividend yield of 2.6%. AFL has a PE ratio of 9.3. Currently there are 5 analysts that rate Aflac a buy, no analysts rate it a sell, and 10 rate it a hold.

The average volume for Aflac has been 2.4 million shares per day over the past 30 days. Aflac has a market cap of $26.8 billion and is part of the financial sector and insurance industry. The stock has a beta of 1.11 and a short float of 1.4% with 2.77 days to cover. Shares are down 12.8% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Aflac as a buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, growth in earnings per share, attractive valuation levels, increase in net income and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • Although AFL's debt-to-equity ratio of 0.26 is very low, it is currently higher than that of the industry average.
  • AFLAC INC's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, AFLAC INC increased its bottom line by earning $6.75 versus $6.11 in the prior year. For the next year, the market is expecting a contraction of 8.6% in earnings ($6.17 versus $6.75).
  • AFL, with its decline in revenue, underperformed when compared the industry average of 21.6%. Since the same quarter one year prior, revenues slightly dropped by 2.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The company, on the basis of net income growth from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Insurance industry average. The net income increased by 0.6% when compared to the same quarter one year prior, going from $702.00 million to $706.00 million.

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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