Barbarian At The Gate: NVIDIA (NVDA)

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 NVIDIA ( NVDA) 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 NVIDIA as such a stock due to the following factors:

  • NVDA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $147.2 million.
  • NVDA has traded 5.7 million shares today.
  • NVDA traded in a range 212.7% of the normal price range with a price range of $1.05.
  • NVDA traded above its daily resistance level (quality: 19 days, meaning that the stock is crossing a resistance level set by the last 19 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 NVDA:

NVIDIA Corporation operates as a visual computing company in the United States, Taiwan, China, the rest of Asia Pacific, Europe, and other Americas. The company operates through two segments, GPU and Tegra Processors. The stock currently has a dividend yield of 1.9%. NVDA has a PE ratio of 18. Currently there are 6 analysts that rate NVIDIA a buy, 3 analysts rate it a sell, and 12 rate it a hold.

The average volume for NVIDIA has been 7.6 million shares per day over the past 30 days. NVIDIA has a market cap of $11.2 billion and is part of the technology sector and electronics industry. The stock has a beta of 1.40 and a short float of 12.7% with 8.51 days to cover. Shares are up 3.4% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

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

Highlights from the ratings report include:
  • NVDA's revenue growth has slightly outpaced the industry average of 0.5%. Since the same quarter one year prior, revenues slightly increased by 4.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • The current debt-to-equity ratio, 0.31, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 5.94, which clearly demonstrates the ability to cover short-term cash needs.
  • Net operating cash flow has significantly increased by 62.89% to $246.00 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 14.73%.
  • The gross profit margin for NVIDIA CORP is rather high; currently it is at 61.42%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 11.64% trails the industry average.

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