Barbarian At The Gate: BRF (BRFS)

Trade-Ideas LLC identified BRF ( BRFS) 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 BRF as such a stock due to the following factors:

  • BRFS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $33.7 million.
  • BRFS has traded 3.1 million shares today.
  • BRFS traded in a range 200% of the normal price range with a price range of $1.01.
  • BRFS traded above its daily resistance level (quality: 2 days, meaning that the stock is crossing a resistance level set by the last 2 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 BRFS:

BRF S.A., together with its subsidiaries, focuses on raising, producing, and slaughtering poultry, pork, and beef in Brazil. It operates in three segments: Domestic Market (Brazil), Foreign Market (International), and Food Service. The stock currently has a dividend yield of 1.5%. BRFS has a PE ratio of 35. Currently there are 2 analysts that rate BRF a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for BRF has been 1.6 million shares per day over the past 30 days. BRF has a market cap of $14.4 billion and is part of the consumer goods sector and food & beverage industry. Shares are down 29% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates BRF as a buy. The company's strengths can be seen in multiple areas, such as its notable return on equity, reasonable valuation levels, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Food Products industry and the overall market, BRF SA's return on equity exceeds that of both the industry average and the S&P 500.
  • 35.62% is the gross profit margin for BRF SA which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 4.50% is above that of the industry average.
  • BRF SA reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, BRF SA increased its bottom line by earning $0.92 versus $0.52 in the prior year. This year, the market expects an improvement in earnings ($3.55 versus $0.92).
  • BRFS, with its decline in revenue, underperformed when compared the industry average of 8.4%. Since the same quarter one year prior, revenues fell by 20.1%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.

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