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Trade-Ideas: Omnicare (OCR) 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 Omnicare ( OCR) 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 Omnicare as such a stock due to the following factors:

  • OCR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $90.1 million.
  • OCR has traded 328,810 shares today.
  • OCR traded in a range 214.6% of the normal price range with a price range of $2.38.
  • OCR traded above its daily resistance level (quality: 28 days, meaning that the stock is crossing a resistance level set by the last 28 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.

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More details on OCR:

Omnicare, Inc. operates as a healthcare services company that specializes in the management of pharmaceutical care in the United States and Canada. It operates through two segments, Long-Term Care Group and Specialty Care Group. The stock currently has a dividend yield of 1.4%. OCR has a PE ratio of 75.6. Currently there are 5 analysts that rate Omnicare a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Omnicare has been 1.2 million shares per day over the past 30 days. Omnicare has a market cap of $5.9 billion and is part of the health care sector and health services industry. The stock has a beta of 0.99 and a short float of 8.8% with 6.19 days to cover. Shares are down 2.5% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Omnicare as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and growth in earnings per share. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 10.3%. Since the same quarter one year prior, revenues slightly increased by 5.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.63, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.93 is somewhat weak and could be cause for future problems.
  • 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 52.49% 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.
  • OMNICARE INC has improved earnings per share by 12.5% 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, OMNICARE INC reported lower earnings of $0.74 versus $1.52 in the prior year. This year, the market expects an improvement in earnings ($3.70 versus $0.74).
  • 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 241.8% when compared to the same quarter one year ago, falling from $59.02 million to -$83.70 million.

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