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Edwards Life (EW) Flagged As A Storm The Castle 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 Edwards Life ( EW) 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 Edwards Life as such a stock due to the following factors:

  • EW has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $107.2 million.
  • EW has traded 500,157 shares today.
  • EW is trading at 1.59 times the normal volume for the stock at this time of day.
  • EW 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 EW:

Edwards Lifesciences Corporation provides products and technologies to treat structural heart disease and critically ill patients worldwide. EW has a PE ratio of 21.3. Currently there are 6 analysts that rate Edwards Life a buy, 1 analyst rates it a sell, and 7 rate it a hold.

The average volume for Edwards Life has been 1.4 million shares per day over the past 30 days. Edwards Life has a market cap of $7.3 billion and is part of the health care sector and health services industry. The stock has a beta of 0.48 and a short float of 8.3% with 4.11 days to cover. Shares are up 2.2% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Edwards Life as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, a generally disappointing performance in the stock itself 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 25.3%. Since the same quarter one year prior, revenues slightly increased by 8.0%. 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.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Health Care Equipment & Supplies industry and the overall market, EDWARDS LIFESCIENCES CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Despite currently having a low debt-to-equity ratio of 0.38, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 3.66 is very high and demonstrates very strong liquidity.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, EW has underperformed the S&P 500 Index, declining 23.28% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Health Care Equipment & Supplies industry. The net income has decreased by 16.8% when compared to the same quarter one year ago, dropping from $91.10 million to $75.80 million.

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