Trade-Ideas LLC identified

Universal Health Services

(

UHS

) 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 Universal Health Services as such a stock due to the following factors:

  • UHS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $99.7 million.
  • UHS has traded 462,234 shares today.
  • UHS is trading at 1.93 times the normal volume for the stock at this time of day.
  • UHS 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 UHS:

Universal Health Services, Inc., through its subsidiaries, owns and operates acute care hospitals, behavioral health centers, surgical hospitals, ambulatory surgery centers, and radiation oncology centers. The stock currently has a dividend yield of 0.3%. UHS has a PE ratio of 22. Currently there are 9 analysts that rate Universal Health Services a buy, 1 analyst rates it a sell, and 4 rate it a hold.

The average volume for Universal Health Services has been 683,000 shares per day over the past 30 days. Universal Health Services has a market cap of $12.3 billion and is part of the health care sector and health services industry. The stock has a beta of 1.24 and a short float of 1.4% with 1.47 days to cover. Shares are up 16.9% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Universal Health Services as a

buy

. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, solid stock price performance and growth in earnings per share. We feel its strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:

  • UHS's revenue growth has slightly outpaced the industry average of 6.6%. Since the same quarter one year prior, revenues rose by 10.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.75, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.18, which illustrates the ability to avoid short-term cash problems.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Health Care Providers & Services industry and the overall market, UNIVERSAL HEALTH SVCS INC's return on equity exceeds that of both the industry average and the S&P 500.
  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. 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.
  • UNIVERSAL HEALTH SVCS INC has improved earnings per share by 19.2% 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 two years. We feel that this trend should continue. During the past fiscal year, UNIVERSAL HEALTH SVCS INC increased its bottom line by earning $5.42 versus $5.13 in the prior year. This year, the market expects an improvement in earnings ($6.99 versus $5.42).

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