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 $50.3 million.
  • SAFM has traded 90,300 shares today.
  • SAFM traded in a range 255.4% of the normal price range with a price range of $6.74.
  • SAFM traded above its daily resistance level (quality: 1 day, meaning that the stock is crossing a resistance level set by the last 1 calendar day. 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%. SAFM has a PE ratio of 9. Currently there are 2 analysts that rate Sanderson Farms a buy, 1 analyst rates it a sell, and 1 rates it a hold.

The average volume for Sanderson Farms has been 535,900 shares per day over the past 30 days. Sanderson Farms has a market cap of $2.0 billion and is part of the consumer goods sector and food & beverage industry. The stock has a beta of 0.76 and a short float of 42.9% with 10.33 days to cover. Shares are up 9.9% year-to-date as of the close of trading on Wednesday.

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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 largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, solid stock price performance and notable return on equity. 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:
  • 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 2.02, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Compared to where it was trading a year ago, SAFM's share price has not changed very much due to (a) the relatively weak year-over-year performance of the overall market, (b) the company's stagnant earnings, and (c) other mixed 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.
  • SAFM, with its decline in revenue, slightly underperformed the industry average of 2.8%. Since the same quarter one year prior, revenues fell by 10.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Food Products industry and the overall market, SANDERSON FARMS INC's return on equity exceeds that of both the industry average and the S&P 500.

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