Barbarian At The Gate: Unum Group (UNM)

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 Unum Group ( UNM) 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 Unum Group as such a stock due to the following factors:

  • UNM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $53.4 million.
  • UNM has traded 139,352 shares today.
  • UNM traded in a range 245.8% of the normal price range with a price range of $1.17.
  • UNM traded above its daily resistance level (quality: 243 days, meaning that the stock is crossing a resistance level set by the last 243 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 UNM:

Unum Group, together with its subsidiaries, provides group and individual disability insurance products in the United States and the United Kingdom. The company operates through three segments: Unum US, Unum UK, and Colonial Life. The stock currently has a dividend yield of 1.9%. UNM has a PE ratio of 22. Currently there are 5 analysts that rate Unum Group a buy, no analysts rate it a sell, and 7 rate it a hold.

The average volume for Unum Group has been 1.5 million shares per day over the past 30 days. Unum Group has a market cap of $8.7 billion and is part of the financial sector and insurance industry. The stock has a beta of 1.63 and a short float of 1.2% with 2.17 days to cover. Shares are up 0.2% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Unum Group as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • UNM's revenue growth has slightly outpaced the industry average of 7.8%. Since the same quarter one year prior, revenues slightly increased by 1.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has increased to $400.10 million or 15.40% when compared to the same quarter last year. In addition, UNUM GROUP has also modestly surpassed the industry average cash flow growth rate of 14.45%.
  • UNUM GROUP' earnings per share from the most recent quarter came in slightly below the year earlier quarter. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, UNUM GROUP reported lower earnings of $1.56 versus $3.23 in the prior year. This year, the market expects an improvement in earnings ($3.65 versus $1.56).
  • Despite currently having a low debt-to-equity ratio of 0.32, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further.
  • In its most recent trading session, UNM has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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.

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