Watch Out: Barbarians At The Gate For OmniVision Technologies (OVTI)

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 OmniVision Technologies ( OVTI) 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 OmniVision Technologies as such a stock due to the following factors:

  • OVTI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $25.9 million.
  • OVTI has traded 349,451 shares today.
  • OVTI traded in a range 230.2% of the normal price range with a price range of $1.33.
  • OVTI traded above its daily resistance level (quality: 6 days, meaning that the stock is crossing a resistance level set by the last 6 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 OVTI:

OmniVision Technologies, Inc. designs, develops, manufactures, and markets semiconductor image-sensor devices worldwide. OVTI has a PE ratio of 16. Currently there are no analysts that rate OmniVision Technologies a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for OmniVision Technologies has been 635,500 shares per day over the past 30 days. OmniVision has a market cap of $1.4 billion and is part of the technology sector and electronics industry. The stock has a beta of 0.80 and a short float of 3.1% with 1.60 days to cover. Shares are down 7.5% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates OmniVision Technologies 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, reasonable valuation levels and solid stock price performance. We feel its strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.

Highlights from the ratings report include:
  • OVTI's debt-to-equity ratio is very low at 0.03 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 3.35, which clearly demonstrates the ability to cover short-term cash needs.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • OVTI, with its decline in revenue, underperformed when compared the industry average of 5.4%. Since the same quarter one year prior, revenues fell by 13.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for OMNIVISION TECHNOLOGIES INC is rather low; currently it is at 24.52%. Regardless of OVTI's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, OVTI's net profit margin of 2.09% is significantly lower than the industry average.

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