Barbarian At The Gate: Macy's (M)

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 Macy's ( M) 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 Macy's as such a stock due to the following factors:

  • M has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $404.6 million.
  • M has traded 9.3 million shares today.
  • M traded in a range 210.2% of the normal price range with a price range of $2.67.
  • M traded above its daily resistance level (quality: 3 days, meaning that the stock is crossing a resistance level set by the last 3 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 M:

Macy's, Inc., together with its subsidiaries, operates stores and Internet Websites in the United States. Its stores and Websites sell a range of merchandise, including apparel and accessories for men, women, and children; cosmetics; home furnishings; and other consumer goods. The stock currently has a dividend yield of 2.3%. M has a PE ratio of 15. Currently there are 7 analysts that rate Macy's a buy, 1 analyst rates it a sell, and 8 rate it a hold.

The average volume for Macy's has been 4.3 million shares per day over the past 30 days. Macy's has a market cap of $21.8 billion and is part of the services sector and retail industry. The stock has a beta of 0.82 and a short float of 4.4% with 2.39 days to cover. Shares are down 3.1% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Macy's as a buy. The company's strengths can be seen in multiple areas, such as its notable return on equity, expanding profit margins and increase in stock price during the past year. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

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. When compared to other companies in the Multiline Retail industry and the overall market, MACY'S INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • 39.02% is the gross profit margin for MACY'S INC which we consider to be strong. It has increased from the same quarter the previous year.
  • 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. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • MACY'S INC's earnings per share declined by 6.7% 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, MACY'S INC increased its bottom line by earning $4.27 versus $3.90 in the prior year. This year, the market expects an improvement in earnings ($4.73 versus $4.27).
  • M, with its decline in revenue, slightly underperformed the industry average of 2.5%. Since the same quarter one year prior, revenues slightly dropped by 0.7%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.

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