Watch Out: Barbarians At The Gate For Delek US Holdings (DK)

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 Delek US Holdings ( DK) 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 Delek US Holdings as such a stock due to the following factors:

  • DK has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $36.0 million.
  • DK has traded 64,252 shares today.
  • DK traded in a range 235.8% of the normal price range with a price range of $2.71.
  • DK traded above its daily resistance level (quality: 1 day, meaning that the stock is crossing a resistance level set by the last 1 calendar day. 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 DK:

Delek US Holdings, Inc. operates as an integrated downstream energy company that operates in petroleum refining, wholesale distribution, and convenience store retailing businesses. The company operates in three segments: Refining, Logistics, and Retail. The stock currently has a dividend yield of 1.6%. DK has a PE ratio of 11.3. Currently there are 4 analysts that rate Delek US Holdings a buy, 1 analyst rates it a sell, and 4 rate it a hold.

The average volume for Delek US Holdings has been 1.1 million shares per day over the past 30 days. Delek US has a market cap of $2.2 billion and is part of the basic materials sector and energy industry. The stock has a beta of 1.99 and a short float of 3.1% with 2.63 days to cover. Shares are up 38.6% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Delek US Holdings as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, compelling growth in net income, attractive valuation levels, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:

  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 897.9% when compared to the same quarter one year prior, rising from -$4.70 million to $37.50 million.
  • Net operating cash flow has increased to $93.00 million or 34.00% when compared to the same quarter last year. In addition, DELEK US HOLDINGS INC has also vastly surpassed the industry average cash flow growth rate of -42.26%.
  • The current debt-to-equity ratio, 0.59, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.75 is somewhat weak and could be cause for future problems.

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