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Watch Out: Barbarians At The Gate For Community Health Systems (CYH)

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 Community Health Systems ( CYH) 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 Community Health Systems as such a stock due to the following factors:

  • CYH has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $54.0 million.
  • CYH has traded 885,679 shares today.
  • CYH traded in a range 207.1% of the normal price range with a price range of $2.49.
  • CYH traded above its daily resistance level (quality: 86 days, meaning that the stock is crossing a resistance level set by the last 86 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.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in CYH with the Ticky from Trade-Ideas. See the FREE profile for CYH NOW at Trade-Ideas

More details on CYH:

Community Health Systems, Inc., together with its subsidiaries, provides general and specialized hospital healthcare services to patients in the United States. CYH has a PE ratio of 16.8. Currently there are 10 analysts that rate Community Health Systems a buy, no analysts rate it a sell, and 7 rate it a hold.

The average volume for Community Health Systems has been 1.9 million shares per day over the past 30 days. Community Health Systems has a market cap of $3.7 billion and is part of the health care sector and health services industry. The stock has a beta of 1.99 and a short float of 7.4% with 5.76 days to cover. Shares are up 28.1% year to date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Community Health Systems as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:

  • Compared to its closing price of one year ago, CYH's share price has jumped by 53.08%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • COMMUNITY HEALTH SYSTEMS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, COMMUNITY HEALTH SYSTEMS INC increased its bottom line by earning $2.96 versus $2.86 in the prior year. This year, the market expects earnings to be in line with last year ($2.96 versus $2.96).
  • The gross profit margin for COMMUNITY HEALTH SYSTEMS INC is currently extremely low, coming in at 14.16%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.91% trails that of the industry average.
  • Net operating cash flow has decreased to $252.02 million or 14.74% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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