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Trade-Ideas: Humana (HUM) 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 Humana ( HUM) 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 Humana as such a stock due to the following factors:

  • HUM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $115.3 million.
  • HUM has traded 1.5 million shares today.
  • HUM traded in a range 289.2% of the normal price range with a price range of $5.40.
  • HUM traded above its daily resistance level (quality: 32 days, meaning that the stock is crossing a resistance level set by the last 32 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 HUM:

Humana Inc., a health care company, offers a range of insurance products, and health and wellness services that incorporate an integrated approach to lifelong well-being. The company operates in three segments: Retail, Employer Group, and Healthcare Services. The stock currently has a dividend yield of 1.2%. HUM has a PE ratio of 9.9. Currently there are 11 analysts that rate Humana a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for Humana has been 1.1 million shares per day over the past 30 days. Humana has a market cap of $14.6 billion and is part of the health care sector and health services industry. The stock has a beta of 0.78 and a short float of 2.6% with 3.39 days to cover. Shares are up 35.5% year to date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Humana 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 increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 10.4%. Since the same quarter one year prior, revenues slightly increased by 6.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • HUM's debt-to-equity ratio is very low at 0.28 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, HUM has a quick ratio of 1.58, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Health Care Providers & Services industry and the overall market, HUMANA INC's return on equity exceeds that of both the industry average and the S&P 500.
  • 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.

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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