VF (VFC) 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 VF ( VFC) 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 VF as such a stock due to the following factors:

  • VFC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $138.3 million.
  • VFC has traded 1.3 million shares today.
  • VFC traded in a range 222.4% of the normal price range with a price range of $2.15.
  • VFC 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 VFC:

V.F. Corporation designs, manufactures, markets, and distributes branded lifestyle apparel, footwear, and accessories in the United States and Europe. The stock currently has a dividend yield of 1.8%. VFC has a PE ratio of 29. Currently there are 16 analysts that rate VF a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for VF has been 1.7 million shares per day over the past 30 days. VF has a market cap of $29.6 billion and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 1.07 and a short float of 1% with 1.94 days to cover. Shares are down 7.3% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

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

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 11.0%. Since the same quarter one year prior, revenues slightly increased by 2.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • The gross profit margin for VF CORP is rather high; currently it is at 51.34%. Regardless of VFC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, VFC's net profit margin of 10.17% compares favorably to the industry average.
  • VF CORP reported flat earnings per share in the most recent 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, VF CORP reported lower earnings of $2.39 versus $2.71 in the prior year. This year, the market expects an improvement in earnings ($3.20 versus $2.39).
  • Despite currently having a low debt-to-equity ratio of 0.51, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.85 is weak.
  • 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. 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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