Barbarian At The Gate: Madison Square Garden (MSG)

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 Madison Square Garden ( MSG) 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 Madison Square Garden as such a stock due to the following factors:

  • MSG has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $37.7 million.
  • MSG has traded 193,243 shares today.
  • MSG traded in a range 233.6% of the normal price range with a price range of $2.55.
  • MSG traded above its daily resistance level (quality: 24 days, meaning that the stock is crossing a resistance level set by the last 24 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 MSG:

The Madison Square Garden Company, together with its subsidiaries, is engaged in sports, entertainment, and media businesses in the United States. It operates through three segments: MSG Sports, MSG Media, and MSG Entertainment. MSG has a PE ratio of 32.1. Currently there are 4 analysts that rate Madison Square Garden a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Madison Square Garden has been 586,200 shares per day over the past 30 days. Madison Square Garden has a market cap of $5.2 billion and is part of the services sector and media industry. The stock has a beta of 0.33 and a short float of 4.5% with 11.84 days to cover. Shares are up 8.9% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Madison Square Garden as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and growth in earnings per share. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 7.2%. Since the same quarter one year prior, revenues slightly increased by 6.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • 43.31% is the gross profit margin for MADISON SQUARE GARDEN 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 11.28% trails the industry average.
  • MSG 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 0.85 is somewhat weak and could be cause for future problems.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 47.50% over the past year, a rise that has exceeded that of the S&P 500 Index. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • MADISON SQUARE GARDEN CO's earnings per share improvement from the most recent quarter was slightly positive. 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, MADISON SQUARE GARDEN CO reported lower earnings of $1.47 versus $1.82 in the prior year. This year, the market expects an improvement in earnings ($2.91 versus $1.47).

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