Barbarian At The Gate: Albemarle (ALB)

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 Albemarle ( ALB) 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 Albemarle as such a stock due to the following factors:

  • ALB has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $61.3 million.
  • ALB has traded 847,181 shares today.
  • ALB traded in a range 203% of the normal price range with a price range of $2.11.
  • ALB traded above its daily resistance level (quality: 226 days, meaning that the stock is crossing a resistance level set by the last 226 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 ALB:

Albemarle Corporation develops, manufactures, and markets engineered specialty chemicals worldwide. The stock currently has a dividend yield of 1.9%. ALB has a PE ratio of 23.4. Currently there are 6 analysts that rate Albemarle a buy, no analysts rate it a sell, and 8 rate it a hold.

The average volume for Albemarle has been 1.2 million shares per day over the past 30 days. Albemarle has a market cap of $6.7 billion and is part of the basic materials sector and chemicals industry. The stock has a beta of 1.07 and a short float of 4.3% with 5.21 days to cover. Shares are down 0.2% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Albemarle as a hold. The company's strongest point has been its a solid financial position based on a variety of debt and liquidity measures that we have looked at. At the same time, however, 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 14.1%. Since the same quarter one year prior, revenues slightly dropped by 6.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • ALBEMARLE CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ALBEMARLE CORP reported lower earnings of $2.56 versus $4.89 in the prior year. This year, the market expects an improvement in earnings ($3.50 versus $2.56).
  • The share price of ALBEMARLE CORP has not done very well: it is down 10.95% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • Net operating cash flow has decreased to $62.07 million or 46.18% 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.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Chemicals industry. The net income has significantly decreased by 111.9% when compared to the same quarter one year ago, falling from $155.93 million to -$18.51 million.

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