Trade-Ideas LLC identified

Quest Diagnostics

(

DGX

) 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 Quest Diagnostics as such a stock due to the following factors:

  • DGX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $49.3 million.
  • DGX has traded 354,371 shares today.
  • DGX traded in a range 202.2% of the normal price range with a price range of $2.54.
  • DGX traded below its daily resistance level (quality: 324 days, meaning that the stock is crossing a resistance level set by the last 324 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 DGX:

Quest Diagnostics Incorporated provides diagnostic testing information services in the United States and internationally. The stock currently has a dividend yield of 2.3%. DGX has a PE ratio of 19. Currently there are 3 analysts that rate Quest Diagnostics a buy, 3 analysts rate it a sell, and 11 rate it a hold.

The average volume for Quest Diagnostics has been 1.0 million shares per day over the past 30 days. Quest has a market cap of $9.4 billion and is part of the health care sector and health services industry. The stock has a beta of 0.25 and a short float of 7.6% with 12.23 days to cover. Shares are down 4% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Quest Diagnostics as a

buy

. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 6.6%. Since the same quarter one year prior, revenues slightly increased by 1.2%. 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.
  • 42.03% is the gross profit margin for QUEST DIAGNOSTICS INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 6.12% is above that of the industry average.
  • The debt-to-equity ratio is somewhat low, currently at 0.87, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.88 is somewhat weak and could be cause for future problems.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • QUEST DIAGNOSTICS INC's earnings per share declined by 11.9% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, QUEST DIAGNOSTICS INC reported lower earnings of $3.77 versus $5.34 in the prior year. This year, the market expects an improvement in earnings ($4.78 versus $3.77).

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