Barbarian At The Gate: Avis Budget Group (CAR)

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 Avis Budget Group ( CAR) 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 Avis Budget Group as such a stock due to the following factors:

  • CAR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $140.7 million.
  • CAR has traded 933,817 shares today.
  • CAR traded in a range 268% of the normal price range with a price range of $3.65.
  • CAR traded above its daily resistance level (quality: 10 days, meaning that the stock is crossing a resistance level set by the last 10 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 CAR:

Avis Budget Group, Inc., together with its subsidiaries, provides car and truck rentals, car sharing, and ancillary services to businesses and consumers worldwide. The company has three segments: North America, International, and Truck Rental. CAR has a PE ratio of 24. Currently there are 3 analysts that rate Avis Budget Group a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for Avis Budget Group has been 1.8 million shares per day over the past 30 days. Avis Budget Group has a market cap of $5.3 billion and is part of the services sector and diversified services industry. The stock has a beta of 1.97 and a short float of 10% with 4.21 days to cover. Shares are down 24.1% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Avis Budget Group as a buy. The company's strengths can be seen in multiple areas, such as its notable return on equity and good cash flow from operations. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Road & Rail industry and the overall market, AVIS BUDGET GROUP INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has increased to $503.00 million or 28.97% when compared to the same quarter last year. In addition, AVIS BUDGET GROUP INC has also modestly surpassed the industry average cash flow growth rate of 22.48%.
  • AVIS BUDGET GROUP INC 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. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, AVIS BUDGET GROUP INC increased its bottom line by earning $2.22 versus $0.07 in the prior year. This year, the market expects an improvement in earnings ($3.44 versus $2.22).
  • CAR, with its decline in revenue, slightly underperformed the industry average of 1.8%. Since the same quarter one year prior, revenues slightly dropped by 0.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The debt-to-equity ratio is very high at 23.16 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.

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