Trade-Ideas: Tenet Healthcare (THC) 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 Tenet Healthcare ( THC) 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 Tenet Healthcare as such a stock due to the following factors:

  • THC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $40.4 million.
  • THC has traded 707,894 shares today.
  • THC traded in a range 236.3% of the normal price range with a price range of $2.37.
  • THC traded below its daily resistance level (quality: 194 days, meaning that the stock is crossing a resistance level set by the last 194 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 THC:

Tenet Healthcare Corporation, an investor-owned health care services company, owns and operates acute care hospitals, ambulatory surgery centers, diagnostic imaging centers, urgent care centers, and related health care facilities in the United States. Currently there are 7 analysts that rate Tenet Healthcare a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Tenet Healthcare has been 1.5 million shares per day over the past 30 days. Tenet Healthcare has a market cap of $4.1 billion and is part of the health care sector and health services industry. The stock has a beta of 2.42 and a short float of 7.6% with 6.25 days to cover. Shares are up 22.8% year to date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Tenet Healthcare as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity.

Highlights from the ratings report include:
  • THC's revenue growth has slightly outpaced the industry average of 4.0%. Since the same quarter one year prior, revenues slightly increased by 6.9%. 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, THC's share price has jumped by 92.97%, exceeding the performance of the broader market during that same time frame. Although THC had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
  • TENET HEALTHCARE CORP 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. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, TENET HEALTHCARE CORP increased its bottom line by earning $1.72 versus $0.44 in the prior year. This year, the market expects an improvement in earnings ($2.26 versus $1.72).
  • The debt-to-equity ratio is very high at 6.30 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, THC maintains a poor quick ratio of 0.89, which illustrates the inability to avoid short-term cash problems.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Health Care Providers & Services industry and the overall market, TENET HEALTHCARE CORP's return on equity significantly trails that of both the industry average and the S&P 500.

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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