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Roof Leaker To Watch: Boston Scientific (BSX)

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 Boston Scientific ( BSX) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Boston Scientific as such a stock due to the following factors:

  • BSX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $174.2 million.
  • BSX has traded 21.4 million shares today.
  • BSX is trading at 5.66 times the normal volume for the stock at this time of day.
  • BSX crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in BSX with the Ticky from Trade-Ideas. See the FREE profile for BSX NOW at Trade-Ideas

More details on BSX:

Boston Scientific Corporation develops, manufactures, and markets medical devices for use in various interventional medical specialties worldwide. The company operates in three segments: Cardiovascular, Rhythm Management, and MedSurg. BSX has a PE ratio of 47.4. Currently there are 11 analysts that rate Boston Scientific a buy, no analysts rate it a sell, and 10 rate it a hold.

The average volume for Boston Scientific has been 12.1 million shares per day over the past 30 days. Boston Scientific has a market cap of $16.9 billion and is part of the health care sector and health services industry. The stock has a beta of 1.03 and a short float of 1.8% with 1.45 days to cover. Shares are up 6.5% year-to-date as of the close of trading on Monday.

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 Boston Scientific as a buy. 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, revenue growth, good cash flow from operations and expanding profit margins. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:

  • BOSTON SCIENTIFIC 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. During the past fiscal year, BOSTON SCIENTIFIC CORP continued to lose money by earning -$0.08 versus -$2.87 in the prior year. This year, the market expects an improvement in earnings ($0.80 versus -$0.08).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Health Care Equipment & Supplies industry. The net income increased by 137.6% when compared to the same quarter one year prior, rising from -$354.00 million to $133.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 3.6%. Since the same quarter one year prior, revenues slightly increased by 0.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Net operating cash flow has increased to $198.00 million or 21.47% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 7.50%.
  • The gross profit margin for BOSTON SCIENTIFIC CORP is currently very high, coming in at 71.25%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 7.49% trails the industry average.

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