PolyOne (POL) Marked As A Barbarian At The Gate

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 PolyOne ( POL) 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 PolyOne as such a stock due to the following factors:

  • POL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $25.3 million.
  • POL has traded 354,990 shares today.
  • POL traded in a range 353.5% of the normal price range with a price range of $1.74.
  • POL traded above its daily resistance level (quality: 56 days, meaning that the stock is crossing a resistance level set by the last 56 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 POL:

PolyOne Corporation provides specialized polymer materials, services, and solutions with operations in specialty polymer formulations, color and additive systems, plastic sheet and packaging solutions, and polymer distribution. The stock currently has a dividend yield of 1%. POL has a PE ratio of 47.6. Currently there are 7 analysts that rate PolyOne a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for PolyOne has been 592,300 shares per day over the past 30 days. PolyOne has a market cap of $3.5 billion and is part of the basic materials sector and chemicals industry. The stock has a beta of 1.49 and a short float of 3.9% with 5.34 days to cover. Shares are up 4.1% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates PolyOne as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, poor profit margins and weak operating cash flow.

Highlights from the ratings report include:
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 10.4%. Since the same quarter one year prior, revenues slightly dropped by 5.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Even though the current debt-to-equity ratio is 1.32, it is still below the industry average, suggesting that this level of debt is acceptable within the Chemicals industry. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.06 is sturdy.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Chemicals industry and the overall market, POLYONE CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • The gross profit margin for POLYONE CORP is rather low; currently it is at 22.02%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -1.67% is significantly below that of the industry average.
  • Net operating cash flow has decreased to $76.60 million or 32.68% 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.

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