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Trade-Ideas: Patterson Companies (PDCO) Is Today's "Water-Logged And Getting Wetter" 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 Patterson Companies (PDCO) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Patterson Companies as such a stock due to the following factors:

  • PDCO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $34.9 million.
  • PDCO has traded 1.1 million shares today.
  • PDCO traded in a range 271.2% of the normal price range with a price range of $1.70.
  • PDCO traded below its daily resistance level (quality: 28 days, meaning that the stock is crossing a resistance level set by the last 28 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' 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 negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on PDCO:

Patterson Companies, Inc. distributes dental, veterinary, and rehabilitation supplies. The stock currently has a dividend yield of 1.5%. PDCO has a PE ratio of 21.1. Currently there are 6 analysts that rate Patterson Companies a buy, no analysts rate it a sell, and 8 rate it a hold.

The average volume for Patterson Companies has been 597,300 shares per day over the past 30 days. Patterson Companies has a market cap of $4.5 billion and is part of the services sector and wholesale industry. The stock has a beta of 0.89 and a short float of 4.6% with 4.46 days to cover. Shares are up 25.3% year to date as of the close of trading on Wednesday.

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 Patterson Companies 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, increase in stock price during the past year and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • The debt-to-equity ratio is somewhat low, currently at 0.62, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, PDCO has a quick ratio of 1.90, which demonstrates the ability of the company to cover short-term liquidity needs.
  • PATTERSON COMPANIES INC 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, PATTERSON COMPANIES INC increased its bottom line by earning $2.03 versus $1.93 in the prior year. This year, the market expects an improvement in earnings ($2.18 versus $2.03).
  • PDCO's share price has surged by 29.97% over the past year, reflecting the market's general trend, despite their weak earnings growth during the last quarter. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
  • PDCO, with its decline in revenue, underperformed when compared the industry average of 9.6%. Since the same quarter one year prior, revenues slightly dropped by 1.0%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Health Care Providers & Services industry and the overall market, PATTERSON COMPANIES INC's return on equity exceeds that of both the industry average and the S&P 500.

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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