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Water-Logged And Getting Wetter: Mylan (MYL)

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 Mylan ( MYL) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Mylan as such a stock due to the following factors:

  • MYL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $143.6 million.
  • MYL has traded 73,940 shares today.
  • MYL traded in a range 221.6% of the normal price range with a price range of $2.22.
  • MYL traded below its daily resistance level (quality: 1 day, meaning that the stock is crossing a resistance level set by the last 1 calendar day. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' 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 negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on MYL:

Mylan Inc., a pharmaceutical company, develops, licenses, manufactures, markets, and distributes generic, branded generic, and specialty pharmaceuticals worldwide. It operates in two segments, Generics and Specialty. MYL has a PE ratio of 31.8. Currently there are 9 analysts that rate Mylan a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Mylan has been 5.2 million shares per day over the past 30 days. Mylan has a market cap of $19.3 billion and is part of the health care sector and drugs industry. The stock has a beta of 1.12 and a short float of 7.3% with 9.57 days to cover. Shares are up 19% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Mylan as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, good cash flow from operations, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 5.4%. Since the same quarter one year prior, revenues slightly increased by 5.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • MYLAN INC has improved earnings per share by 7.4% 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, MYLAN INC increased its bottom line by earning $1.58 versus $1.53 in the prior year. This year, the market expects an improvement in earnings ($3.41 versus $1.58).
  • Net operating cash flow has significantly increased by 206.18% to $268.10 million when compared to the same quarter last year. In addition, MYLAN INC has also vastly surpassed the industry average cash flow growth rate of 10.66%.
  • The gross profit margin for MYLAN INC is rather high; currently it is at 52.51%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, MYL's net profit margin of 6.75% significantly trails the industry average.
  • 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 61.20% 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.

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