Barbarian At The Gate: Santander Consumer USA Holdings (SC)

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 Santander Consumer USA Holdings ( SC) 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 Santander Consumer USA Holdings as such a stock due to the following factors:

  • SC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $45.8 million.
  • SC has traded 159,546 shares today.
  • SC traded in a range 209.3% of the normal price range with a price range of $0.82.
  • SC traded above its daily resistance level (quality: 21 days, meaning that the stock is crossing a resistance level set by the last 21 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 SC:

Santander Consumer USA Holdings Inc., a specialized consumer finance company, provides vehicle finance and unsecured consumer lending products in the United States. The company's vehicle finance products and services include retail installment contracts, vehicle leases, and dealer loans. SC has a PE ratio of 9. Currently there are 6 analysts that rate Santander Consumer USA Holdings a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for Santander Consumer USA Holdings has been 1.7 million shares per day over the past 30 days. Santander Consumer USA has a market cap of $8.6 billion and is part of the financial sector and real estate industry. Shares are up 25.6% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Santander Consumer USA Holdings as a sell. Among the areas we feel are negative, one of the most important has been very high debt management risk by most measures.

Highlights from the ratings report include:
  • The debt-to-equity ratio is very high at 7.72 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
  • The gross profit margin for SANTANDER CONSUMER USA HLDGS is rather high; currently it is at 51.07%. 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 16.84% trails the industry average.
  • Net operating cash flow has increased to $1,243.20 million or 46.02% when compared to the same quarter last year. In addition, SANTANDER CONSUMER USA HLDGS has also vastly surpassed the industry average cash flow growth rate of -37.83%.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Consumer Finance industry and the overall market, SANTANDER CONSUMER USA HLDGS's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • Looking at where the stock is today compared to one year ago, we find that it is higher, and it has outperformed the rise in the S&P 500 over the same period. Regardless of the rise in share value over the previous year, we feel that the risks involved in investing in this stock do not compensate for any future upside potential.

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