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Trade-Ideas: Health Management Associates (HMA) 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 Health Management Associates ( HMA) 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 Health Management Associates as such a stock due to the following factors:

  • HMA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $27.1 million.
  • HMA has traded 1.4 million shares today.
  • HMA traded in a range 217.1% of the normal price range with a price range of $0.25.
  • HMA traded above its daily resistance level (quality: 49 days, meaning that the stock is crossing a resistance level set by the last 49 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 HMA with the Ticky from Trade-Ideas. See the FREE profile for HMA NOW at Trade-Ideas

More details on HMA:

Health Management Associates, Inc., through its subsidiaries, engages in the operation of general acute care hospitals and other health care facilities in non-urban communities in the United States. The stock currently has a dividend yield of 3.3%. Currently there are 2 analysts that rate Health Management Associates a buy, no analysts rate it a sell, and 14 rate it a hold.

The average volume for Health Management Associates has been 4.2 million shares per day over the past 30 days. Health Management Associates has a market cap of $3.5 billion and is part of the health care sector and health services industry. The stock has a beta of 1.71 and a short float of 4.4% with 4.55 days to cover. Shares are up 40.5% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Health Management Associates as a hold. Among the primary strengths of the company is its solid stock price performance. At the same time, however, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:

  • Compared to its closing price of one year ago, HMA's share price has jumped by 60.09%, 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.
  • HMA, with its decline in revenue, underperformed when compared the industry average of 9.4%. Since the same quarter one year prior, revenues slightly dropped by 1.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The debt-to-equity ratio is very high at 3.76 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, HMA's quick ratio is somewhat strong at 1.25, demonstrating the ability to handle short-term liquidity needs.
  • HEALTH MANAGEMENT ASSOC 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. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, HEALTH MANAGEMENT ASSOC reported lower earnings of $0.61 versus $0.72 in the prior year. For the next year, the market is expecting a contraction of 21.3% in earnings ($0.48 versus $0.61).
  • 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 Providers & Services industry. The net income has significantly decreased by 287.6% when compared to the same quarter one year ago, falling from $40.94 million to -$76.83 million.

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