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 Valeant Pharmaceuticals International ( VRX) 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 Valeant Pharmaceuticals International as such a stock due to the following factors:
- VRX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $110.0 million.
- VRX has traded 1.2 million shares today.
- VRX traded in a range 234.4% of the normal price range with a price range of $5.60.
- VRX traded below its daily resistance level (quality: 34 days, meaning that the stock is crossing a resistance level set by the last 34 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. EXCLUSIVE OFFER: Get the inside scoop on opportunities in VRX with the Ticky from Trade-Ideas. See the FREE profile for VRX NOW at Trade-Ideas More details on VRX: Valeant Pharmaceuticals International, Inc., a specialty pharmaceutical company, develops, manufactures, and markets pharmaceutical products and medical devices in the areas of neurology, dermatology, and branded generics. The stock currently has a dividend yield of 0.9%. Currently there are 9 analysts that rate Valeant Pharmaceuticals International a buy, 1 analyst rates it a sell, and 3 rate it a hold. The average volume for Valeant Pharmaceuticals International has been 1.2 million shares per day over the past 30 days. Valeant Pharmaceuticals International has a market cap of $34.5 billion and is part of the health care sector and drugs industry. The stock has a beta of 1.43 and a short float of 1.9% with 3.85 days to cover. Shares are up 73.5% year to date as of the close of trading on Friday. 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 Valeant Pharmaceuticals International as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and increase in net income. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and generally higher debt management risk. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 2.6%. Since the same quarter one year prior, revenues rose by 33.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Powered by its strong earnings growth of 142.85% and other important driving factors, this stock has surged by 107.72% over the past year, outperforming the rise in the S&P 500 Index during the same period. Although VRX 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.
- The gross profit margin for VALEANT PHARMACEUTICALS INTL is currently very high, coming in at 76.56%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, VRX's net profit margin of 0.99% significantly trails the industry average.
- Currently the debt-to-equity ratio of 1.89 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Regardless of the company's weak debt-to-equity ratio, VRX has managed to keep a strong quick ratio of 2.08, which demonstrates the ability to cover short-term cash needs.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Pharmaceuticals industry and the overall market, VALEANT PHARMACEUTICALS INTL's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full Valeant Pharmaceuticals International Ratings Report.
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.