Watch Out: Barbarians At The Gate For Scientific Games (SGMS)

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 Scientific Games ( SGMS) 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 Scientific Games as such a stock due to the following factors:

  • SGMS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $24.6 million.
  • SGMS has traded 539,135 shares today.
  • SGMS traded in a range 205.7% of the normal price range with a price range of $1.09.
  • SGMS traded above its daily resistance level (quality: 440 days, meaning that the stock is crossing a resistance level set by the last 440 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.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in SGMS with the Ticky from Trade-Ideas. See the FREE profile for SGMS NOW at Trade-Ideas

More details on SGMS:

Scientific Games Corporation develops technology-based products and services, and associated content for the gaming and lottery industries worldwide. The company operates through three segments: Gaming, Lottery, and Interactive. Currently there are 4 analysts that rate Scientific Games a buy, 1 analyst rates it a sell, and 4 rate it a hold.

The average volume for Scientific Games has been 1.4 million shares per day over the past 30 days. Scientific Games has a market cap of $1.3 billion and is part of the services sector and leisure industry. The stock has a beta of 2.43 and a short float of 29.9% with 10.99 days to cover. Shares are up 20.7% year-to-date as of the close of trading on Monday.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

TheStreetRatings.com Analysis:

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

Highlights from the ratings report include:
  • SGMS's very impressive revenue growth greatly exceeded the industry average of 7.3%. Since the same quarter one year prior, revenues leaped by 69.7%. 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.
  • Compared to its closing price of one year ago, SGMS's share price has jumped by 64.60%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • The gross profit margin for SCIENTIFIC GAMES CORP is rather high; currently it is at 62.91%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -13.11% is in-line with the industry average.
  • SCIENTIFIC GAMES CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, SCIENTIFIC GAMES CORP reported poor results of -$2.76 versus -$0.31 in the prior year. For the next year, the market is expecting a contraction of 38.8% in earnings (-$3.83 versus -$2.76).
  • 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 Hotels, Restaurants & Leisure industry. The net income has significantly decreased by 92.0% when compared to the same quarter one year ago, falling from -$45.00 million to -$86.40 million.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

More from Markets

Billionaire Investor Tim Draper Explains Why Bitcoin Will Hit $250,000 in 2022

Billionaire Investor Tim Draper Explains Why Bitcoin Will Hit $250,000 in 2022

To Think a Trade War's Still Just a Threat Is the Dumbest Thing on Wall Street

To Think a Trade War's Still Just a Threat Is the Dumbest Thing on Wall Street

M&A Trends Still on Investors' Minds Despite Worries Over Tariffs -- ICYMI

M&A Trends Still on Investors' Minds Despite Worries Over Tariffs -- ICYMI

Dow Falls as U.S. Imposes Tariffs on $50 Billion of Chinese Goods

Dow Falls as U.S. Imposes Tariffs on $50 Billion of Chinese Goods

General Motors Spikes on Report It's Considering Listing Shares of Cruise Unit

General Motors Spikes on Report It's Considering Listing Shares of Cruise Unit