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

Covance

(

CVD

) 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 Covance as such a stock due to the following factors:

  • CVD has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $33.3 million.
  • CVD has traded 93,419 shares today.
  • CVD traded in a range 236.2% of the normal price range with a price range of $3.32.
  • CVD traded below its daily resistance level (quality: 4 days, meaning that the stock is crossing a resistance level set by the last 4 calendar days. 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 CVD:

Covance Inc., a drug development services company, provides a range of early-stage and late-stage product development services to the pharmaceutical and biotechnology industries worldwide. It operates in two segments, Early Development and Late-Stage Development. CVD has a PE ratio of 27.6. Currently there are 11 analysts that rate Covance a buy, 1 analyst rates it a sell, and 5 rate it a hold.

The average volume for Covance has been 451,700 shares per day over the past 30 days. Covance has a market cap of $5.0 billion and is part of the health care sector and health services industry. The stock has a beta of 1.00 and a short float of 3.6% with 4.58 days to cover. Shares are up 1% year-to-date as of the close of trading on Tuesday.

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 Covance as a

buy

. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and growth in earnings per share. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:

  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Life Sciences Tools & Services industry average. The net income increased by 5.5% when compared to the same quarter one year prior, going from $48.17 million to $50.82 million.
  • CVD's revenue growth trails the industry average of 21.6%. Since the same quarter one year prior, revenues slightly increased by 5.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • CVD's debt-to-equity ratio is very low at 0.15 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, CVD has a quick ratio of 2.34, which demonstrates the ability of the company to cover short-term liquidity needs.
  • COVANCE INC's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, COVANCE INC increased its bottom line by earning $3.16 versus $1.67 in the prior year. This year, the market expects an improvement in earnings ($3.83 versus $3.16).

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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