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.

Trade-Ideas LLC identified YY Inc ADR ( YY) 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 YY Inc ADR as such a stock due to the following factors:

  • YY has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $62.1 million.
  • YY has traded 1.0 million shares today.
  • YY traded in a range 238.1% of the normal price range with a price range of $5.82.
  • YY traded above its daily resistance level (quality: 47 days, meaning that the stock is crossing a resistance level set by the last 47 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 YY:

YY Inc., through its subsidiaries, operates an online social platform in the People's Republic of China. YY has a PE ratio of 17.5. Currently there are 6 analysts that rate YY Inc ADR a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for YY Inc ADR has been 1.5 million shares per day over the past 30 days. YY Inc ADR has a market cap of $3.2 billion and is part of the technology sector and internet industry. Shares are down 10.7% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates YY Inc ADR as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

Highlights from the ratings report include:
  • YY's very impressive revenue growth greatly exceeded the industry average of 18.7%. Since the same quarter one year prior, revenues leaped by 78.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • YY INC -ADR reported significant earnings per share improvement 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. This trend suggests that the performance of the business is improving. During the past fiscal year, YY INC -ADR increased its bottom line by earning $2.79 versus $1.34 in the prior year. This year, the market expects an improvement in earnings ($3.85 versus $2.79).
  • YY's debt-to-equity ratio of 0.85 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 4.68 is very high and demonstrates very strong liquidity.
  • 46.55% is the gross profit margin for YY INC -ADR which we consider to be strong. Regardless of YY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, YY's net profit margin of 31.94% compares favorably to the industry average.
  • YY'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 32.13%, 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. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.

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