Qualcomm (QCOM) 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 Qualcomm ( QCOM) 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 Qualcomm as such a stock due to the following factors:

  • QCOM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $837.8 million.
  • QCOM has traded 12.9 million shares today.
  • QCOM traded in a range 208.1% of the normal price range with a price range of $2.04.
  • QCOM traded above its daily resistance level (quality: 43 days, meaning that the stock is crossing a resistance level set by the last 43 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 QCOM:

QUALCOMM Incorporated designs, develops, manufactures, and markets digital communications products and services in China, South Korea, Taiwan, and the United States. The stock currently has a dividend yield of 2.8%. QCOM has a PE ratio of 16. Currently there are 15 analysts that rate Qualcomm a buy, no analysts rate it a sell, and 9 rate it a hold.

The average volume for Qualcomm has been 11.7 million shares per day over the past 30 days. Qualcomm has a market cap of $113.3 billion and is part of the technology sector and telecommunications industry. The stock has a beta of 1.28 and a short float of 1.3% with 1.63 days to cover. Shares are down 6.7% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Qualcomm 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, notable return on equity 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:
  • QCOM's revenue growth has slightly outpaced the industry average of 2.8%. Since the same quarter one year prior, revenues slightly increased by 8.3%. 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.
  • QCOM's debt-to-equity ratio is very low at 0.03 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.86, which clearly demonstrates the ability to cover short-term cash needs.
  • 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. Compared to other companies in the Communications Equipment industry and the overall market, QUALCOMM INC's return on equity exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for QUALCOMM INC is rather high; currently it is at 67.17%. 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 15.27% trails the industry average.
  • QUALCOMM INC's earnings per share declined by 44.7% 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, QUALCOMM INC increased its bottom line by earning $4.40 versus $3.91 in the prior year. This year, the market expects an improvement in earnings ($4.79 versus $4.40).

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