Trade-Ideas: Omnicare (OCR) 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 Omnicare ( OCR) 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 Omnicare as such a stock due to the following factors:

  • OCR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $51.6 million.
  • OCR has traded 4.3 million shares today.
  • OCR traded in a range 401.3% of the normal price range with a price range of $4.19.
  • OCR traded below its daily resistance level (quality: 56 days, meaning that the stock is crossing a resistance level set by the last 56 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 OCR:

Omnicare, Inc. operates as a healthcare services company that specializes in the management of pharmaceutical care in the United States and Canada. The company operates in two segments, Long-Term Care Group and Specialty Care Group. The stock currently has a dividend yield of 1.2%. OCR has a PE ratio of 70.8. Currently there are 4 analysts that rate Omnicare a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Omnicare has been 838,300 shares per day over the past 30 days. Omnicare has a market cap of $6.6 billion and is part of the services sector and wholesale industry. The stock has a beta of 1.11 and a short float of 9.4% with 11.35 days to cover. Shares are up 6.7% year-to-date as of the close of trading on Tuesday.

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 Omnicare 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 and solid stock price performance. We feel these 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 10.1%. Since the same quarter one year prior, revenues slightly increased by 5.3%. 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.
  • The current debt-to-equity ratio, 0.59, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.11, which illustrates the ability to avoid short-term cash problems.
  • Compared to its closing price of one year ago, OCR's share price has jumped by 63.03%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • OMNICARE INC has experienced 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, OMNICARE INC increased its bottom line by earning $1.74 versus $1.43 in the prior year. This year, the market expects an improvement in earnings ($3.61 versus $1.74).
  • Net operating cash flow has declined marginally to $192.00 million or 2.18% when compared to the same quarter last year. Despite a decrease in cash flow OMNICARE INC is still fairing well by exceeding its industry average cash flow growth rate of -46.42%.

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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