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 Quest Diagnostics ( DGX) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Quest Diagnostics as such a stock due to the following factors:
- DGX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $133.2 million.
- DGX has traded 2.4 million shares today.
- DGX is trading at 12.00 times the normal volume for the stock at this time of day.
- DGX crossed above its 200-day simple moving average.
'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success. EXCLUSIVE OFFER: Get the inside scoop on opportunities in DGX with the Ticky from Trade-Ideas. See the FREE profile for DGX NOW at Trade-Ideas More details on DGX: Quest Diagnostics Incorporated provides diagnostic testing information services in the United States and internationally. The company operates in two businesses, Diagnostic Information Services and Diagnostic Solutions. The stock currently has a dividend yield of 2.4%. DGX has a PE ratio of 10.4. Currently there are 2 analysts that rate Quest Diagnostics a buy, 4 analysts rate it a sell, and 12 rate it a hold. The average volume for Quest Diagnostics has been 2.4 million shares per day over the past 30 days. Quest has a market cap of $8.0 billion and is part of the health care sector and health services industry. The stock has a beta of 0.60 and a short float of 16.8% with 11.53 days to cover. Shares are up 2.6% 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 Quest Diagnostics as a buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, notable return on equity, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and growth in earnings per share. We feel these strengths outweigh the fact that the company shows weak operating cash flow. Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Health Care Providers & Services industry. The net income increased by 155.5% when compared to the same quarter one year prior, rising from $55.82 million to $142.61 million.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Health Care Providers & Services industry and the overall market, QUEST DIAGNOSTICS INC's return on equity exceeds that of both the industry average and the S&P 500.
- The debt-to-equity ratio is somewhat low, currently at 0.84, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.92 is somewhat weak and could be cause for future problems.
- 43.34% is the gross profit margin for QUEST DIAGNOSTICS INC which we consider to be strong. Regardless of DGX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, DGX's net profit margin of 8.11% compares favorably to the industry average.
- QUEST DIAGNOSTICS INC has improved earnings per share by 11.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, QUEST DIAGNOSTICS INC increased its bottom line by earning $5.34 versus $3.91 in the prior year. For the next year, the market is expecting a contraction of 24.1% in earnings ($4.05 versus $5.34).
- You can view the full Quest Diagnostics 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.