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Barbarian At The Gate: WellCare Health Plans (WCG)

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 WellCare Health Plans ( WCG) 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 WellCare Health Plans as such a stock due to the following factors:

  • WCG has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $39.4 million.
  • WCG has traded 585,297 shares today.
  • WCG traded in a range 230.7% of the normal price range with a price range of $3.84.
  • WCG traded above its daily resistance level (quality: 75 days, meaning that the stock is crossing a resistance level set by the last 75 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 WCG with the Ticky from Trade-Ideas. See the FREE profile for WCG NOW at Trade-Ideas

More details on WCG:

WellCare Health Plans, Inc. provides managed care services for government-sponsored health care programs in the United States. It operates in three segments: Medicaid, MA, and PDP. WCG has a PE ratio of 16.3. Currently there are 6 analysts that rate WellCare Health Plans a buy, 1 analyst rates it a sell, and 4 rate it a hold.

The average volume for WellCare Health Plans has been 651,600 shares per day over the past 30 days. WellCare Health Plans has a market cap of $2.9 billion and is part of the health care sector and health services industry. The stock has a beta of 1.39 and a short float of 4% with 2.67 days to cover. Shares are down 4.9% year-to-date as of the close of trading on Wednesday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates WellCare Health Plans as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 10.4%. Since the same quarter one year prior, revenues rose by 22.7%. 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.
  • The current debt-to-equity ratio, 0.40, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, WCG has a quick ratio of 2.08, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • WELLCARE HEALTH PLANS INC's earnings per share declined by 12.6% in the most recent quarter compared to 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, WELLCARE HEALTH PLANS INC reported lower earnings of $3.98 versus $4.22 in the prior year. This year, the market expects earnings to be in line with last year ($3.98 versus $3.98).

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