Barbarian At The Gate: Maxim Integrated Products (MXIM)

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 Maxim Integrated Products ( MXIM) 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 Maxim Integrated Products as such a stock due to the following factors:

  • MXIM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $69.8 million.
  • MXIM has traded 2.6 million shares today.
  • MXIM traded in a range 242.2% of the normal price range with a price range of $1.23.
  • MXIM traded above its daily resistance level (quality: 57 days, meaning that the stock is crossing a resistance level set by the last 57 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 MXIM:

Maxim Integrated Products, Inc. designs, develops, manufactures, and markets various linear and mixed-signal integrated circuits worldwide. The company also provides a range of high-frequency process technologies and capabilities for use in custom designs. The stock currently has a dividend yield of 3.3%. MXIM has a PE ratio of 51. Currently there are 8 analysts that rate Maxim Integrated Products a buy, 2 analysts rate it a sell, and 8 rate it a hold.

The average volume for Maxim Integrated Products has been 2.5 million shares per day over the past 30 days. Maxim Integrated has a market cap of $9.7 billion and is part of the technology sector and electronics industry. The stock has a beta of 0.42 and a short float of 3% with 3.23 days to cover. Shares are up 7.4% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Maxim Integrated Products as a buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:

  • The current debt-to-equity ratio, 0.44, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 4.91, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for MAXIM INTEGRATED PRODUCTS is rather high; currently it is at 66.30%. Regardless of MXIM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 13.76% trails the industry average.
  • MAXIM INTEGRATED PRODUCTS's earnings per share declined by 33.3% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, MAXIM INTEGRATED PRODUCTS reported lower earnings of $1.22 versus $1.52 in the prior year. This year, the market expects an improvement in earnings ($1.49 versus $1.22).
  • MXIM, with its decline in revenue, slightly underperformed the industry average of 0.7%. Since the same quarter one year prior, revenues slightly dropped by 4.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • In its most recent trading session, MXIM has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Despite the stock's decline during the last year, it is still somewhat more expensive (in proportion to its earnings over the last year) than most other stocks in its industry. We feel, however, that other strengths this company displays offset this slight negative.

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