Trade-Ideas: Actavis (ACT) Is Today's

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 Actavis ( ACT) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Actavis as such a stock due to the following factors:

  • ACT has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $155.2 million.
  • ACT has traded 382,257 shares today.
  • ACT traded in a range 202.6% of the normal price range with a price range of $5.36.
  • ACT traded above its daily resistance level (quality: 63 days, meaning that the stock is crossing a resistance level set by the last 63 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' 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 positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock s movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on ACT:

Actavis, Inc., an integrated specialty pharmaceutical company, engages in developing, manufacturing, marketing, selling, and distributing generic, branded generic, brand, biosimilar, and over-the-counter pharmaceutical products worldwide. Currently there are 12 analysts that rate Actavis a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for Actavis has been 1.7 million shares per day over the past 30 days. Actavis has a market cap of $16.1 billion and is part of the health care sector and drugs industry. The stock has a beta of 0.11 and a short float of 3.9% with 4.72 days to cover. Shares are up 47% year to date as of the close of trading on Wednesday.

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 Actavis as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 3.5%. Since the same quarter one year prior, revenues rose by 24.4%. 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.
  • Compared to its closing price of one year ago, ACT's share price has jumped by 60.53%, exceeding the performance of the broader market during that same time frame. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
  • Net operating cash flow has significantly increased by 117.72% to $218.60 million when compared to the same quarter last year. In addition, ACTAVIS INC has also vastly surpassed the industry average cash flow growth rate of -48.63%.
  • The gross profit margin for ACTAVIS INC is rather high; currently it is at 50.24%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -5.42% is in-line with the industry average.
  • ACTAVIS INC has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, ACTAVIS INC reported lower earnings of $0.75 versus $2.07 in the prior year. This year, the market expects an improvement in earnings ($8.30 versus $0.75).

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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