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Storm The Castle: DaVita HealthCare Partners (DVA)

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 DaVita HealthCare Partners (DVA) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified DaVita HealthCare Partners as such a stock due to the following factors:

  • DVA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $180.4 million.
  • DVA has traded 468,978 shares today.
  • DVA is trading at 2.34 times the normal volume for the stock at this time of day.
  • DVA crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on DVA:

DaVita HealthCare Partners Inc. provides kidney dialysis services for patients suffering from chronic kidney failure, or end stage renal disease (ESRD) in the United States. DVA has a PE ratio of 21.5. Currently there are 7 analysts that rate DaVita HealthCare Partners a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for DaVita HealthCare Partners has been 1.8 million shares per day over the past 30 days. DaVita HealthCare has a market cap of $12.1 billion and is part of the health care sector and health services industry. The stock has a beta of 1.14 and a short float of 3.5% with 2.42 days to cover. Shares are up 3.4% 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 DaVita HealthCare Partners as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • DVA's very impressive revenue growth greatly exceeded the industry average of 9.6%. Since the same quarter one year prior, revenues leaped by 54.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • DAVITA HEALTHCARE PARTNERS's earnings per share declined by 14.1% in the most recent quarter compared to the same quarter a year ago. 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, DAVITA HEALTHCARE PARTNERS increased its bottom line by earning $2.73 versus $2.58 in the prior year. This year, the market expects an improvement in earnings ($3.80 versus $2.73).
  • Net operating cash flow has significantly increased by 99.96% to $733.13 million when compared to the same quarter last year. Despite an increase in cash flow of 99.96%, DAVITA HEALTHCARE PARTNERS is still growing at a significantly lower rate than the industry average of 324.99%.
  • Currently the debt-to-equity ratio of 1.98 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Even though the debt-to-equity ratio is weak, DVA's quick ratio is somewhat strong at 1.12, demonstrating the ability to handle short-term liquidity needs.

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