Watch Out: Barbarians At The Gate For Cinemark Holdings (CNK)

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 Cinemark Holdings ( CNK) 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 Cinemark Holdings as such a stock due to the following factors:

  • CNK has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $23.9 million.
  • CNK has traded 261,441 shares today.
  • CNK traded in a range 211.4% of the normal price range with a price range of $1.52.
  • CNK traded above its daily resistance level (quality: 40 days, meaning that the stock is crossing a resistance level set by the last 40 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 CNK:

Chico's FAS, Inc. operates as an omni-channel specialty retailer of women's private branded, casual-to-dressy clothing, intimates, complementary accessories, and other non-clothing items. The stock currently has a dividend yield of 2.4%. CNK has a PE ratio of 24. Currently there are 11 analysts that rate Cinemark Holdings a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Cinemark Holdings has been 706,200 shares per day over the past 30 days. Cinemark has a market cap of $4.7 billion and is part of the services sector and media industry. The stock has a beta of 0.80 and a short float of 1.4% with 2.50 days to cover. Shares are up 14% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Cinemark Holdings as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, compelling growth in net income, notable return on equity and solid stock price performance. We feel its strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • CNK's revenue growth has slightly outpaced the industry average of 3.8%. Since the same quarter one year prior, revenues slightly increased by 7.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • CINEMARK HOLDINGS INC has improved earnings per share by 19.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, CINEMARK HOLDINGS INC increased its bottom line by earning $1.67 versus $1.28 in the prior year. This year, the market expects an improvement in earnings ($2.14 versus $1.67).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Media industry average. The net income increased by 20.0% when compared to the same quarter one year prior, going from $35.44 million to $42.52 million.
  • 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. In comparison to the other companies in the Media industry and the overall market, CINEMARK HOLDINGS INC's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 28.41% over the past year, a rise that has exceeded that of the S&P 500 Index. 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.

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