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 Sanderson Farms ( SAFM) 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 Sanderson Farms as such a stock due to the following factors:

  • SAFM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $27.8 million.
  • SAFM has traded 260,350 shares today.
  • SAFM traded in a range 220.2% of the normal price range with a price range of $3.92.
  • SAFM traded above its daily resistance level (quality: 41 days, meaning that the stock is crossing a resistance level set by the last 41 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 SAFM:

Sanderson Farms, Inc., an integrated poultry processing company, produces, processes, markets, and distributes fresh, frozen, and prepared chicken products in the United States. The stock currently has a dividend yield of 1.2%. SAFM has a PE ratio of 6. Currently there are no analysts that rate Sanderson Farms a buy, 1 analyst rates it a sell, and 2 rate it a hold.

The average volume for Sanderson Farms has been 491,800 shares per day over the past 30 days. Sanderson Farms has a market cap of $1.7 billion and is part of the consumer goods sector and food & beverage industry. The stock has a beta of 1.32 and a short float of 37.8% with 21.85 days to cover. Shares are down 13.8% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Sanderson Farms as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, attractive valuation levels and good cash flow from operations. 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 revenue growth came in higher than the industry average of 12.5%. Since the same quarter one year prior, revenues slightly increased by 8.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • SAFM's debt-to-equity ratio is very low at 0.01 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, SAFM has a quick ratio of 1.79, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Food Products industry and the overall market, SANDERSON FARMS INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • SANDERSON FARMS INC has improved earnings per share by 41.6% 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, SANDERSON FARMS INC increased its bottom line by earning $10.80 versus $5.67 in the prior year. This year, the market expects an improvement in earnings ($11.21 versus $10.80).

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