Watch Out: Barbarians At The Gate For SBA Communications (SBAC)

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 SBA Communications ( SBAC) 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 SBA Communications as such a stock due to the following factors:

  • SBAC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $117.1 million.
  • SBAC has traded 832,924 shares today.
  • SBAC traded in a range 201.8% of the normal price range with a price range of $3.37.
  • SBAC traded above its daily resistance level (quality: 11 days, meaning that the stock is crossing a resistance level set by the last 11 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 SBAC:

SBA Communications Corporation owns and operates wireless communications tower structures, rooftops, and other structures that support antennas used for wireless communications in the United States and its territories, Canada, Central America, and Brazil. Currently there are 11 analysts that rate SBA Communications a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for SBA Communications has been 884,800 shares per day over the past 30 days. SBA has a market cap of $14.6 billion and is part of the technology sector and telecommunications industry. The stock has a beta of 0.51 and a short float of 1.5% with 2.14 days to cover. Shares are up 0.9% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates SBA Communications as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, weak operating cash flow and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • The revenue growth significantly trails the industry average of 56.3%. Since the same quarter one year prior, revenues rose by 18.7%. 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.
  • The gross profit margin for SBA COMMUNICATIONS CORP is currently very high, coming in at 72.91%. 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 -19.27% is in-line with the industry average.
  • 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. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • Net operating cash flow has declined marginally to $178.41 million or 0.31% when compared to the same quarter last year. Despite a decrease in cash flow SBA COMMUNICATIONS CORP is still fairing well by exceeding its industry average cash flow growth rate of -37.17%.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Wireless Telecommunication Services industry. The net income has significantly decreased by 5716.9% when compared to the same quarter one year ago, falling from $1.41 million to -$79.03 million.

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