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Trade-Ideas: CVS Caremark (CVS) Is Today's "Barbarian At The Gate" Stock

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 or Stephanie Link.

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

  • CVS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $373.6 million.
  • CVS has traded 4.1 million shares today.
  • CVS traded in a range 218.2% of the normal price range with a price range of $1.95.
  • CVS traded above its daily resistance level (quality: 27 days, meaning that the stock is crossing a resistance level set by the last 27 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 CVS:

CVS Caremark Corporation, together with its subsidiaries, provides integrated pharmacy health care services in the United States. The stock currently has a dividend yield of 1.6%. CVS has a PE ratio of 17.2. Currently there are 12 analysts that rate CVS Caremark a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for CVS Caremark has been 4.6 million shares per day over the past 30 days. CVS Caremark has a market cap of $71.1 billion and is part of the services sector and retail industry. The stock has a beta of 0.74 and a short float of 1% with 1.98 days to cover. Shares are up 19.8% year to date as of the close of trading on Friday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates CVS Caremark as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, impressive record of earnings per share growth, increase in net income and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:

  • CVS's revenue growth has slightly outpaced the industry average of 2.5%. Since the same quarter one year prior, revenues slightly increased by 1.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. 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.
  • CVS CAREMARK CORP has improved earnings per share by 21.3% 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, CVS CAREMARK CORP increased its bottom line by earning $3.04 versus $2.61 in the prior year. This year, the market expects an improvement in earnings ($3.95 versus $3.04).
  • The net income growth from the same quarter one year ago has exceeded that of the Food & Staples Retailing industry average, but is less than that of the S&P 500. The net income increased by 16.0% when compared to the same quarter one year prior, going from $966.00 million to $1,121.00 million.
  • CVS's debt-to-equity ratio is very low at 0.24 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that CVS's debt-to-equity ratio is low, the quick ratio, which is currently 0.65, displays a potential problem in covering short-term cash needs.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

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