Trade-Ideas: Computer (CSC) Is Today's

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 Computer ( CSC) 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 Computer as such a stock due to the following factors:

  • CSC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $59.6 million.
  • CSC has traded 502,498 shares today.
  • CSC traded in a range 440% of the normal price range with a price range of $4.04.
  • CSC traded above its daily resistance level (quality: 65 days, meaning that the stock is crossing a resistance level set by the last 65 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 CSC:

Computer Sciences Corporation provides information technology (IT) and professional services and solutions in North America, Europe, Asia, and Australia. The company operates through Global Business Services, Global Infrastructure Services, and North American Public Sector segments. The stock currently has a dividend yield of 1.4%. CSC has a PE ratio of 306. Currently there are 2 analysts that rate Computer a buy, 2 analysts rate it a sell, and 7 rate it a hold.

The average volume for Computer has been 1.3 million shares per day over the past 30 days. Computer has a market cap of $9.1 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 0.64 and a short float of 7.9% with 12.25 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 Computer as a buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • The debt-to-equity ratio is somewhat low, currently at 0.82, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, CSC has a quick ratio of 1.51, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has increased to $653.00 million or 23.44% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -11.38%.
  • Despite the weak revenue results, CSC has outperformed against the industry average of 22.5%. Since the same quarter one year prior, revenues slightly dropped by 8.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • COMPUTER SCIENCES 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. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, COMPUTER SCIENCES CORP increased its bottom line by earning $5.07 versus $3.07 in the prior year. For the next year, the market is expecting a contraction of 9.5% in earnings ($4.59 versus $5.07).

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