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Medidata Solutions (MDSO) Shows Signs Of Being 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 Medidata Solutions ( MDSO) 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 Medidata Solutions as such a stock due to the following factors:

  • MDSO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $33.0 million.
  • MDSO has traded 538,180 shares today.
  • MDSO traded in a range 201.9% of the normal price range with a price range of $6.17.
  • MDSO traded below its daily resistance level (quality: 91 days, meaning that the stock is crossing a resistance level set by the last 91 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 MDSO:

Medidata Solutions, Inc. provides cloud-based clinical development solutions for life sciences organizations in the United States and internationally. MDSO has a PE ratio of 133.1. Currently there are 5 analysts that rate Medidata Solutions a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Medidata Solutions has been 419,700 shares per day over the past 30 days. Medidata has a market cap of $3.1 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 1.28 and a short float of 6% with 4.05 days to cover. Shares are down 4% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Medidata Solutions as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in net income, good cash flow from operations, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 12.4%. Since the same quarter one year prior, revenues rose by 27.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Health Care Technology industry average. The net income increased by 30.1% when compared to the same quarter one year prior, rising from $4.05 million to $5.27 million.
  • Net operating cash flow has significantly increased by 141.06% to $20.44 million when compared to the same quarter last year. In addition, MEDIDATA SOLUTIONS INC has also vastly surpassed the industry average cash flow growth rate of -0.54%.
  • The gross profit margin for MEDIDATA SOLUTIONS INC is currently very high, coming in at 77.87%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 7.43% trails the industry average.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 168.50% over the past year, a rise that has exceeded that of the S&P 500 Index. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

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