Watch Out: Barbarians At The Gate For Universal Display (OLED)

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 Universal Display ( OLED) 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 Universal Display as such a stock due to the following factors:

  • OLED has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $20.9 million.
  • OLED has traded 65,715 shares today.
  • OLED traded in a range 257% of the normal price range with a price range of $3.47.
  • OLED traded above its daily resistance level (quality: 532 days, meaning that the stock is crossing a resistance level set by the last 532 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 OLED:

Universal Display Corporation engages in the research, development, and commercialization of organic light emitting diode (OLED) technologies and materials for use in flat panel displays and solid-state lighting applications. OLED has a PE ratio of 50.1. Currently there are 3 analysts that rate Universal Display a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Universal Display has been 705,700 shares per day over the past 30 days. Universal Display has a market cap of $2.1 billion and is part of the technology sector and electronics industry. The stock has a beta of 1.30 and a short float of 19.3% with 13.77 days to cover. Shares are up 62.5% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Universal Display as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, 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:
  • The revenue growth came in higher than the industry average of 3.4%. Since the same quarter one year prior, revenues rose by 13.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • OLED has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 11.58, which clearly demonstrates the ability to cover short-term cash needs.
  • Net operating cash flow has increased to $28.49 million or 27.13% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -21.52%.
  • 36.32% is the gross profit margin for UNIVERSAL DISPLAY CORP which we consider to be strong. Regardless of OLED's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, OLED's net profit margin of 23.36% significantly outperformed against the industry.
  • Compared to its closing price of one year ago, OLED's share price has jumped by 69.17%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

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