Middleby (MIDD) Marked As A Barbarian At The Gate

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 Middleby ( MIDD) 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 Middleby as such a stock due to the following factors:

  • MIDD has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $30.1 million.
  • MIDD has traded 56,286 shares today.
  • MIDD traded in a range 287.6% of the normal price range with a price range of $5.64.
  • MIDD traded above its daily resistance level (quality: 56 days, meaning that the stock is crossing a resistance level set by the last 56 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 MIDD:

The Middleby Corporation designs, manufactures, markets, distributes, and services commercial foodservice and food processing, and residential kitchen equipment in the United States, Canada, Asia, Europe, the Middle East, and Latin America. MIDD has a PE ratio of 3. Currently there are 3 analysts that rate Middleby a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Middleby has been 351,600 shares per day over the past 30 days. Middleby has a market cap of $5.8 billion and is part of the industrial goods sector and industrial industry. The stock has a beta of 1.11 and a short float of 2.4% with 4.67 days to cover. Shares are up 1.9% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Middleby as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, good cash flow from operations, growth in earnings per share and solid stock price performance. We feel its strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 10.5%. Since the same quarter one year prior, revenues rose by 15.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Machinery industry average. The net income increased by 3.7% when compared to the same quarter one year prior, going from $49.92 million to $51.75 million.
  • Net operating cash flow has increased to $69.50 million or 11.07% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -32.24%.
  • MIDDLEBY CORP's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, MIDDLEBY CORP increased its bottom line by earning $3.40 versus $2.73 in the prior year. This year, the market expects an improvement in earnings ($4.00 versus $3.40).
  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Looking ahead, the stock's 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 the other strengths this company displays justify these higher price levels.

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