Today's Roof Leaker Stock Is DaVita HealthCare Partners (DVA)

Trade-Ideas LLC identified DaVita HealthCare Partners ( DVA) 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 DaVita HealthCare Partners as such a stock due to the following factors:

  • DVA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $74.8 million.
  • DVA has traded 1.2 million shares today.
  • DVA is trading at 1.83 times the normal volume for the stock at this time of day.
  • DVA 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.

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More details on DVA:

DaVita HealthCare Partners Inc. provides kidney dialysis services for patients suffering from chronic kidney failure or end stage renal disease (ESRD). The company operates in two divisions, Kidney Care and HealthCare Partners. DVA has a PE ratio of 39. Currently there are 6 analysts that rate DaVita HealthCare Partners a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for DaVita HealthCare Partners has been 988,200 shares per day over the past 30 days. DaVita HealthCare has a market cap of $17.2 billion and is part of the health care sector and health services industry. The stock has a beta of 0.41 and a short float of 1.4% with 2.54 days to cover. Shares are up 5.7% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates DaVita HealthCare Partners as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income and solid stock price performance. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • DVA's revenue growth has slightly outpaced the industry average of 6.5%. Since the same quarter one year prior, revenues slightly increased by 8.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • DAVITA HEALTHCARE PARTNERS has improved earnings per share by 14.7% 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, DAVITA HEALTHCARE PARTNERS increased its bottom line by earning $3.34 versus $2.90 in the prior year. This year, the market expects an improvement in earnings ($3.75 versus $3.34).
  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Health Care Providers & Services industry average. The net income increased by 15.4% when compared to the same quarter one year prior, going from $147.68 million to $170.48 million.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • Currently the debt-to-equity ratio of 1.79 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Regardless of the company's weak debt-to-equity ratio, DVA has managed to keep a strong quick ratio of 1.80, which demonstrates the ability to cover short-term cash needs.

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