WellPoint (WLP) Marked As A Barbarian At The Gate

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 WellPoint ( WLP) 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 WellPoint as such a stock due to the following factors:

  • WLP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $262.4 million.
  • WLP has traded 1.8 million shares today.
  • WLP traded in a range 210.7% of the normal price range with a price range of $3.89.
  • WLP traded above its daily resistance level (quality: 41 days, meaning that the stock is crossing a resistance level set by the last 41 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 WLP:

WellPoint, Inc., a health benefits company, through its subsidiaries, provides a range of medical and specialty products in the United States. The stock currently has a dividend yield of 2%. WLP has a PE ratio of 10.1. Currently there are 6 analysts that rate WellPoint a buy, no analysts rate it a sell, and 10 rate it a hold.

The average volume for WellPoint has been 2.4 million shares per day over the past 30 days. WellPoint has a market cap of $25.9 billion and is part of the health care sector and health services industry. The stock has a beta of 0.58 and a short float of 2% with 2.07 days to cover. Shares are down 4.2% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates WellPoint as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels 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:
  • WLP's revenue growth has slightly outpaced the industry average of 11.1%. Since the same quarter one year prior, revenues rose by 15.2%. 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. To add to this, WLP has a quick ratio of 1.64, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Compared to its closing price of one year ago, WLP's share price has jumped by 40.15%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, WLP should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • WELLPOINT INC's earnings per share declined by 32.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, WELLPOINT INC increased its bottom line by earning $8.65 versus $8.13 in the prior year. For the next year, the market is expecting a contraction of 3.0% in earnings ($8.39 versus $8.65).

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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