Barbarian At The Gate: Molson Coors Brewing (TAP)

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 Molson Coors Brewing ( TAP) 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 Molson Coors Brewing as such a stock due to the following factors:

  • TAP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $88.6 million.
  • TAP has traded 196,778 shares today.
  • TAP traded in a range 252.3% of the normal price range with a price range of $2.60.
  • TAP traded above its daily resistance level (quality: 2 days, meaning that the stock is crossing a resistance level set by the last 2 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 TAP:

Molson Coors Brewing Company manufactures and sells beer and other beverage products. The stock currently has a dividend yield of 2.2%. TAP has a PE ratio of 26.4. Currently there are 4 analysts that rate Molson Coors Brewing a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Molson Coors Brewing has been 1.6 million shares per day over the past 30 days. Molson Coors Brewing has a market cap of $11.9 billion and is part of the consumer goods sector and food & beverage industry. Shares are down 2.1% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Molson Coors Brewing as a buy. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • Net operating cash flow has significantly increased by 54.99% to $214.20 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 43.62%.
  • The current debt-to-equity ratio, 0.41, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that TAP's debt-to-equity ratio is low, the quick ratio, which is currently 0.54, displays a potential problem in covering short-term cash needs.
  • 42.86% is the gross profit margin for MOLSON COORS BREWING CO which we consider to be strong. Regardless of TAP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 9.66% trails the industry average.
  • MOLSON COORS BREWING CO's earnings per share declined by 32.4% 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 year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, MOLSON COORS BREWING CO reported lower earnings of $2.75 versus $3.06 in the prior year. This year, the market expects an improvement in earnings ($3.86 versus $2.75).
  • TAP, with its decline in revenue, slightly underperformed the industry average of 4.9%. Since the same quarter one year prior, revenues slightly dropped by 5.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

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