Barbarian At The Gate: Copa Holdings (CPA)

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 Copa Holdings ( CPA) 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 Copa Holdings as such a stock due to the following factors:

  • CPA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $43.6 million.
  • CPA has traded 143,657 shares today.
  • CPA traded in a range 213.6% of the normal price range with a price range of $3.39.
  • CPA traded above its daily resistance level (quality: 5 days, meaning that the stock is crossing a resistance level set by the last 5 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 CPA:

Copa Holdings, S.A. provides airline passenger and cargo services in Latin America. It offers services within Colombia; and international flights from various cities in Colombia to Panama, Venezuela, Ecuador, Mexico, Cuba, Guatemala, and Costa Rica. The stock currently has a dividend yield of 3.9%. CPA has a PE ratio of 12. Currently there are 4 analysts that rate Copa Holdings a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Copa Holdings has been 565,800 shares per day over the past 30 days. Copa has a market cap of $2.8 billion and is part of the services sector and transportation industry. The stock has a beta of 0.88 and a short float of 16% with 11.17 days to cover. Shares are down 17.9% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Copa Holdings as a buy. Among the primary strengths of the company is its solid financial position based on a variety of debt and liquidity measures that we have evaluated. We feel its strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.

Highlights from the ratings report include:
  • The current debt-to-equity ratio, 0.54, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.77 is somewhat weak and could be cause for future problems.
  • CPA, with its decline in revenue, underperformed when compared the industry average of 3.3%. Since the same quarter one year prior, revenues fell by 11.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Airlines industry and the overall market on the basis of return on equity, COPA HOLDINGS SA has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • Looking at the price performance of CPA's shares over the past 12 months, there is not much good news to report: the stock is down 37.88%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Looking ahead, the stock's sharp decline over the past year may have been what was needed in order to bring its value into alignment with its fundamentals and others in its industry.
  • The gross profit margin for COPA HOLDINGS SA is currently lower than what is desirable, coming in at 25.12%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 17.90% is above that of the industry average.

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