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AthenaHealth (ATHN) Falls Further As It's Water-Logged And Getting Wetter

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 AthenaHealth ( ATHN) 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 AthenaHealth as such a stock due to the following factors:

  • ATHN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $45.8 million.
  • ATHN has traded 1.2 million shares today.
  • ATHN traded in a range 243% of the normal price range with a price range of $9.47.
  • ATHN traded below its daily resistance level (quality: 54 days, meaning that the stock is crossing a resistance level set by the last 54 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 ATHN:

athenahealth, Inc., a business services company, provides ongoing billing, clinical-related, and other related services to medical group practices primarily in the United States. The company provides services through the athenaNet, a proprietary Internet-based practice management application. Currently there are 5 analysts that rate AthenaHealth a buy, 3 analysts rate it a sell, and 14 rate it a hold.

The average volume for AthenaHealth has been 476,400 shares per day over the past 30 days. AthenaHealth has a market cap of $5.0 billion and is part of the services sector and diversified services industry. The stock has a beta of 0.66 and a short float of 28.5% with 20.73 days to cover. Shares are up 82.5% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates AthenaHealth as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 9.4%. Since the same quarter one year prior, revenues rose by 43.1%. 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 its closing price of one year ago, ATHN's share price has jumped by 100.44%, exceeding the performance of the broader market during that same time frame. Although ATHN had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
  • The gross profit margin for ATHENAHEALTH INC is rather high; currently it is at 60.70%. Regardless of ATHN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ATHN's net profit margin of 0.77% is significantly lower than the industry average.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Health Care Technology industry. The net income has significantly decreased by 81.2% when compared to the same quarter one year ago, falling from $6.21 million to $1.17 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Health Care Technology industry and the overall market, ATHENAHEALTH INC's return on equity significantly trails that of both the industry average and the S&P 500.

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