Trade-Ideas: E*Trade Financial (ETFC) Is Today's

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 E*Trade Financial ( ETFC) 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 E*Trade Financial as such a stock due to the following factors:

  • ETFC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $112.1 million.
  • ETFC has traded 4.7 million shares today.
  • ETFC traded in a range 225.6% of the normal price range with a price range of $1.42.
  • ETFC traded above its daily resistance level (quality: 532 days, meaning that the stock is crossing a resistance level set by the last 532 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 ETFC:

E*TRADE Financial Corporation, a financial services company, provides brokerage and related products and services primarily to individual retail investors under the E*TRADE Financial brand name. It operates through two segments, Trading and Investing, and Balance Sheet Management. ETFC has a PE ratio of 36. Currently there are 6 analysts that rate E*Trade Financial a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for E*Trade Financial has been 3.3 million shares per day over the past 30 days. E*Trade Financial has a market cap of $8.5 billion and is part of the financial sector and financial services industry. The stock has a beta of 1.71 and a short float of 1.5% with 1.36 days to cover. Shares are up 21.5% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates E*Trade Financial as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, expanding profit margins and notable return on equity. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • Compared to its closing price of one year ago, ETFC's share price has jumped by 47.79%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • E TRADE FINANCIAL 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. 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, E TRADE FINANCIAL CORP increased its bottom line by earning $1.00 versus $0.29 in the prior year. This year, the market expects an improvement in earnings ($1.18 versus $1.00).
  • ETFC, with its decline in revenue, underperformed when compared the industry average of 5.8%. Since the same quarter one year prior, revenues slightly dropped by 5.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 44.51% is the gross profit margin for E TRADE FINANCIAL CORP which we consider to be strong. Regardless of ETFC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ETFC's net profit margin of 7.98% is significantly lower than the industry average.
  • 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. When compared to other companies in the Capital Markets industry and the overall market, E TRADE FINANCIAL CORP's return on equity is below that of both the industry average and the S&P 500.

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