NEW YORK (TheStreet) -- A fundamental story in the latest issue of Barron's tells readers why the shares of Hologic (HOLX) - Get Report could double in five years. The price chart of HOLX is bullish, but not a double, in my opinion. Let's see what the charts suggest.
In this chart of HOLX, above, we can see that prices have stayed above the rising 200-day Simple Moving Average -- a good trend-following signal. Over the past four months, HOLX has traded sideways around a now-flat 50-day moving average. There was a bullish divergence in the September to October period -- between lower lows in price and a higher low in the momentum study. This bullish divergence is constructive, but it has not propelled HOLX to new 52-week highs. We would be more encouraged if the On-Balance-Volume (OBV) line had broken out to new highs, foreshadowing a breakout in price, but that is not the case, here.
This longer-term chart of HOLX, above, is positive, but is not "super compelling." Prices are above the rising 40-week moving average. The OBV line is steady and the Moving Average Convergence Divergence (MACD) oscillator is heading towards a bullish crossover. The bottom line: HOLX is a technical "hold," with a sell-stop at $36. HOLX could breakout to the upside, but it will need a burst of volume to confirm and support the advance. Other stocks we have highlighted in recent weeks are more compelling buys, right now.
TheStreet Ratings team rates HOLOGIC INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
We rate HOLOGIC INC (HOLX) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and unimpressive growth in net income.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth significantly trails the industry average of 37.8%. Since the same quarter one year prior, revenues slightly increased by 6.4%. 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 significantly increased by 76.53% to $232.50 million when compared to the same quarter last year. In addition, HOLOGIC INC has also vastly surpassed the industry average cash flow growth rate of 4.61%.
- Compared to its closing price of one year ago, HOLX's share price has jumped by 50.43%, exceeding the performance of the broader market during that same time frame. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- The change in net income from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Health Care Equipment & Supplies industry average. The net income has decreased by 10.7% when compared to the same quarter one year ago, dropping from $28.10 million to $25.10 million.
- Currently the debt-to-equity ratio of 1.75 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with the unfavorable debt-to-equity ratio, HOLX maintains a poor quick ratio of 0.96, which illustrates the inability to avoid short-term cash problems.
- You can view the full analysis from the report here: HOLX
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.