Barbarian At The Gate: Pentair (PNR)

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 Pentair ( PNR) 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 Pentair as such a stock due to the following factors:

  • PNR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $114.2 million.
  • PNR has traded 4.7 million shares today.
  • PNR traded in a range 244.2% of the normal price range with a price range of $2.20.
  • PNR traded above its daily resistance level (quality: 216 days, meaning that the stock is crossing a resistance level set by the last 216 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 PNR:

Pentair plc operates as a diversified industrial manufacturing company in the United States, Europe, and internationally. The company operates through Valves & Controls, Technical Solutions, Flow & Filtration Solutions, and Water Quality Systems segments. The stock currently has a dividend yield of 2%. PNR has a PE ratio of 2. Currently there are 4 analysts that rate Pentair a buy, 1 analyst rates it a sell, and 14 rate it a hold.

The average volume for Pentair has been 1.3 million shares per day over the past 30 days. Pentair has a market cap of $11.5 billion and is part of the industrial goods sector and industrial industry. The stock has a beta of 1.22 and a short float of 3.1% with 3.36 days to cover. Shares are down 3% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Pentair 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, growth in earnings per share, expanding profit margins, reasonable valuation levels and notable return on equity. 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 debt-to-equity ratio is somewhat low, currently at 0.77, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.04, which illustrates the ability to avoid short-term cash problems.
  • PENTAIR PLC's earnings per share improvement from the most recent quarter was slightly positive. 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, PENTAIR PLC increased its bottom line by earning $3.18 versus $2.51 in the prior year. This year, the market expects an improvement in earnings ($3.75 versus $3.18).
  • 38.66% is the gross profit margin for PENTAIR PLC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 7.72% trails the industry average.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 11.4%. Since the same quarter one year prior, revenues fell by 10.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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