Why Credit Suisse Upgraded WellCare Health (WCG)

NEW YORK (TheStreet) -- Credit Suisse upgraded WellCare Health Plans  (WCG) to "outperform" from "neutral" with a $70 price target, noting the stock has underperformed and appears poised to rebound.

Year to date, shares have taken off 15.9%. 

WCG Chart WCG data by YCharts

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TheStreet Ratings team rates WELLCARE HEALTH PLANS INC as a Buy with a ratings score of B. The team has this to say about their recommendation:

"We rate WELLCARE HEALTH PLANS INC (WCG) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. 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 increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 11.1%. Since the same quarter one year prior, revenues rose by 22.7%. 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, 0.40, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, WCG has a quick ratio of 2.06, which demonstrates the ability of the company to cover short-term liquidity needs.
  • WELLCARE HEALTH PLANS INC's earnings per share declined by 12.6% in the most recent quarter compared to 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, WELLCARE HEALTH PLANS INC reported lower earnings of $3.98 versus $4.22 in the prior year. This year, the market expects an improvement in earnings ($4.00 versus $3.98).
  • In its most recent trading session, WCG has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.

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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