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Watch Out: Barbarians At The Gate For WebMD Health Corporation (WBMD)

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 WebMD Health Corporation ( WBMD) 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 WebMD Health Corporation as such a stock due to the following factors:

  • WBMD has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $37.5 million.
  • WBMD has traded 393,604 shares today.
  • WBMD traded in a range 242% of the normal price range with a price range of $3.78.
  • WBMD traded above its daily resistance level (quality: 45 days, meaning that the stock is crossing a resistance level set by the last 45 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 WBMD with the Ticky from Trade-Ideas. See the FREE profile for WBMD NOW at Trade-Ideas

More details on WBMD:

WebMD Health Corp. provides health information services to consumers, physicians and other healthcare professionals, employers, and health plans through its public and private online portals, mobile platforms, and health-focused publications in the United States. WBMD has a PE ratio of 133.9. Currently there is 1 analyst that rates WebMD Health Corporation a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for WebMD Health Corporation has been 1.0 million shares per day over the past 30 days. WebMD Health has a market cap of $1.6 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 0.94 and a short float of 26.1% with 9.33 days to cover. Shares are down 4.6% year-to-date as of the close of trading on Friday.

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 WebMD Health Corporation as a hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and revenue growth. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and generally higher debt management risk.

Highlights from the ratings report include:

  • WEBMD HEALTH CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, WEBMD HEALTH CORP turned its bottom line around by earning $0.33 versus -$0.44 in the prior year. This year, the market expects an improvement in earnings ($0.72 versus $0.33).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Internet Software & Services industry. The net income increased by 277.6% when compared to the same quarter one year prior, rising from -$6.09 million to $10.81 million.
  • The gross profit margin for WEBMD HEALTH CORP is rather high; currently it is at 60.51%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, WBMD's net profit margin of 7.39% significantly trails the industry average.
  • The debt-to-equity ratio is very high at 4.99 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 5.92, which shows the ability to cover short-term cash needs.
  • Net operating cash flow has decreased to $24.18 million or 20.33% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

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