Barbarian At The Gate: Agrium (AGU)

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 Agrium ( AGU) 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 Agrium as such a stock due to the following factors:

  • AGU has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $65.3 million.
  • AGU has traded 436,224 shares today.
  • AGU traded in a range 209.1% of the normal price range with a price range of $4.17.
  • AGU traded above its daily resistance level (quality: 19 days, meaning that the stock is crossing a resistance level set by the last 19 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 AGU:

Agrium Inc. produces, markets, and distributes crop nutrients, crop protection products, seeds, and merchandise products primarily in the United States, Canada, South America, Europe, and Australia, and internationally. It operates in two segments, Retail and Wholesale. The stock currently has a dividend yield of 3%. AGU has a PE ratio of 19.0. Currently there are 7 analysts that rate Agrium a buy, 1 analyst rates it a sell, and 10 rate it a hold.

The average volume for Agrium has been 604,900 shares per day over the past 30 days. Agrium has a market cap of $15.0 billion and is part of the basic materials sector and chemicals industry. Shares are up 10.3% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Agrium as a buy. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, increase in stock price during the past year and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. 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 debt-to-equity ratio is somewhat low, currently at 0.76, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that AGU's debt-to-equity ratio is low, the quick ratio, which is currently 0.53, displays a potential problem in covering short-term cash needs.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 14.1%. Since the same quarter one year prior, revenues slightly dropped by 5.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • AGRIUM INC's earnings per share declined by 37.0% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, AGRIUM INC reported lower earnings of $5.51 versus $7.25 in the prior year. This year, the market expects an improvement in earnings ($7.68 versus $5.51).

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