Barbarian At The Gate: ONEOK (OKE)

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 ONEOK ( OKE) 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 ONEOK as such a stock due to the following factors:

  • OKE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $124.0 million.
  • OKE has traded 304,862 shares today.
  • OKE traded in a range 201.7% of the normal price range with a price range of $2.51.
  • OKE traded above its daily resistance level (quality: 7 days, meaning that the stock is crossing a resistance level set by the last 7 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 OKE:

ONEOK, Inc. engages in the gathering, processing, storage, and transportation of natural gas in the United States. It operates in Natural Gas Gathering and Processing, Natural Gas Liquids, and Natural Gas Pipelines segments. The stock currently has a dividend yield of 5.6%. OKE has a PE ratio of 32. Currently there are 4 analysts that rate ONEOK a buy, 2 analysts rate it a sell, and 6 rate it a hold.

The average volume for ONEOK has been 2.0 million shares per day over the past 30 days. ONEOK has a market cap of $9.1 billion and is part of the utilities sector and utilities industry. The stock has a beta of 1.16 and a short float of 5.2% with 4.18 days to cover. Shares are down 12.9% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates ONEOK as a hold. Among the primary strengths of the company is its respectable return on equity which we feel is likely to continue. At the same time, however, we also find weaknesses including a generally disappointing performance in the stock itself, generally higher debt management risk and weak operating cash flow.

Highlights from the ratings report include:
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ONEOK INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • ONEOK INC's earnings per share declined by 34.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ONEOK INC increased its bottom line by earning $1.53 versus $1.33 in the prior year. This year, the market expects an improvement in earnings ($1.56 versus $1.53).
  • OKE, with its decline in revenue, slightly underperformed the industry average of 37.8%. Since the same quarter one year prior, revenues fell by 42.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Net operating cash flow has significantly decreased to $39.27 million or 91.99% 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.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 32.03%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 34.09% compared to the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, OKE is still more expensive than most of the other companies in its industry.

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