AutoNation (AN) 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 AutoNation ( AN) 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 AutoNation as such a stock due to the following factors:

  • AN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $47.2 million.
  • AN has traded 421,264 shares today.
  • AN traded in a range 206.4% of the normal price range with a price range of $1.63.
  • AN traded above its daily resistance level (quality: 7 days, meaning that the stock is crossing a resistance level set by the last 7 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 AN:

AutoNation, Inc., through its subsidiaries, operates as an automotive retailer in the United States. The company operates in three segments: Domestic, Import, and Premium Luxury. AN has a PE ratio of 17. Currently there is 1 analyst that rates AutoNation a buy, 1 analyst rates it a sell, and 7 rate it a hold.

The average volume for AutoNation has been 785,700 shares per day over the past 30 days. AutoNation has a market cap of $7.1 billion and is part of the services sector and specialty retail industry. The stock has a beta of 0.96 and a short float of 2.4% with 2.08 days to cover. Shares are up 1.6% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates AutoNation as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in stock price during the past year, impressive record of earnings per share growth, increase in net income and reasonable valuation levels. 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:
  • AN's revenue growth has slightly outpaced the industry average of 10.3%. Since the same quarter one year prior, revenues rose by 13.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. 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.
  • AUTONATION INC has improved earnings per share by 22.8% in the most recent quarter compared to the same quarter a year ago. 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, AUTONATION INC increased its bottom line by earning $3.54 versus $3.05 in the prior year. This year, the market expects an improvement in earnings ($4.09 versus $3.54).
  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Specialty Retail industry average. The net income increased by 17.2% when compared to the same quarter one year prior, going from $95.10 million to $111.50 million.

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Closing Bell: LIVE MARKETS BLOG

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