Barbarian At The Gate: DigitalGlobe (DGI)

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 DigitalGlobe ( DGI) 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 DigitalGlobe as such a stock due to the following factors:

  • DGI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $29.0 million.
  • DGI has traded 624,211 shares today.
  • DGI traded in a range 221.7% of the normal price range with a price range of $2.13.
  • DGI traded above its daily resistance level (quality: 48 days, meaning that the stock is crossing a resistance level set by the last 48 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 DGI:

DigitalGlobe, Inc. provides imagery and imagery information products and services in the United States and internationally. DGI has a PE ratio of 99.5. Currently there are 6 analysts that rate DigitalGlobe a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for DigitalGlobe has been 556,700 shares per day over the past 30 days. DigitalGlobe has a market cap of $1.9 billion and is part of the industrial goods sector and aerospace/defense industry. The stock has a beta of -0.74 and a short float of 16.4% with 8.79 days to cover. Shares are down 36.6% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates DigitalGlobe as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, 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 and weak operating cash flow.

Highlights from the ratings report include:
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Aerospace & Defense industry. The net income increased by 150.0% when compared to the same quarter one year prior, rising from -$1.80 million to $0.90 million.
  • The gross profit margin for DIGITALGLOBE INC is currently very high, coming in at 73.54%. 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 0.58% trails the industry average.
  • DIGITALGLOBE INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, DIGITALGLOBE INC swung to a loss, reporting -$1.12 versus $0.83 in the prior year. This year, the market expects an improvement in earnings ($0.07 versus -$1.12).
  • DGI's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 41.28%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
  • Net operating cash flow has decreased to $47.40 million or 36.20% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

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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