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Barbarian At The Gate: Community Health Systems (CYH)

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 Community Health Systems ( CYH) 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 Community Health Systems as such a stock due to the following factors:

  • CYH has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $96.3 million.
  • CYH has traded 1.1 million shares today.
  • CYH traded in a range 215.3% of the normal price range with a price range of $2.41.
  • CYH traded above its daily resistance level (quality: 216 days, meaning that the stock is crossing a resistance level set by the last 216 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 CYH with the Ticky from Trade-Ideas. See the FREE profile for CYH NOW at Trade-Ideas

More details on CYH:

Community Health Systems, Inc., together with its subsidiaries, provides general and specialized hospital healthcare services to patients in the United States. Currently there are 12 analysts that rate Community Health Systems a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Community Health Systems has been 1.9 million shares per day over the past 30 days. Community Health Systems has a market cap of $4.8 billion and is part of the health care sector and health services industry. The stock has a beta of 1.82 and a short float of 6.2% with 2.85 days to cover. Shares are up 7.3% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Community Health Systems as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 16.8%. Since the same quarter one year prior, revenues rose by 28.1%. 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.
  • Net operating cash flow has increased to $65.00 million or 13.72% when compared to the same quarter last year. Despite an increase in cash flow, COMMUNITY HEALTH SYSTEMS INC's cash flow growth rate is still lower than the industry average growth rate of 37.05%.
  • COMMUNITY HEALTH SYSTEMS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, COMMUNITY HEALTH SYSTEMS INC reported lower earnings of $1.54 versus $2.96 in the prior year. This year, the market expects an improvement in earnings ($2.85 versus $1.54).
  • The gross profit margin for COMMUNITY HEALTH SYSTEMS INC is currently extremely low, coming in at 14.49%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -2.66% trails that of the industry average.
  • 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 $79.00 million to -$112.00 million.

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