Watch Out: Barbarians At The Gate For Triumph Group (TGI)

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 Triumph Group ( TGI) 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 Triumph Group as such a stock due to the following factors:

  • TGI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $30.9 million.
  • TGI has traded 65,478 shares today.
  • TGI traded in a range 203.3% of the normal price range with a price range of $2.67.
  • TGI traded above its daily resistance level (quality: 28 days, meaning that the stock is crossing a resistance level set by the last 28 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 TGI:

Triumph Group, Inc., through its subsidiaries, is engaged in the design, engineering, manufacture, repair, overhaul, and distribution of aero structures, aircraft components, accessories, subassemblies, and systems worldwide. The stock currently has a dividend yield of 0.3%. TGI has a PE ratio of 15.1. Currently there are 6 analysts that rate Triumph Group a buy, 2 analysts rate it a sell, and 3 rate it a hold.

The average volume for Triumph Group has been 479,800 shares per day over the past 30 days. Triumph Group has a market cap of $2.9 billion and is part of the industrial goods sector and aerospace/defense industry. The stock has a beta of 1.10 and a short float of 4.6% with 4.83 days to cover. Shares are down 14% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Triumph Group as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 3.4%. Since the same quarter one year prior, revenues slightly increased by 0.2%. 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.
  • The debt-to-equity ratio is somewhat low, currently at 0.64, 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 TGI's debt-to-equity ratio is low, the quick ratio, which is currently 0.69, displays a potential problem in covering short-term cash needs.
  • 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 Aerospace & Defense industry. The net income has significantly decreased by 212.5% when compared to the same quarter one year ago, falling from $35.39 million to -$39.83 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Aerospace & Defense industry and the overall market, TRIUMPH GROUP INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.

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