St Jude Medical (STJ) Falls Further As It's Water-Logged And Getting Wetter

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 St Jude Medical ( STJ) 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 St Jude Medical as such a stock due to the following factors:

  • STJ has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $106.0 million.
  • STJ has traded 1.1 million shares today.
  • STJ traded in a range 233% of the normal price range with a price range of $3.41.
  • STJ traded below its daily resistance level (quality: 69 days, meaning that the stock is crossing a resistance level set by the last 69 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 STJ:

St. Jude Medical, Inc. develops, manufactures and distributes medical devices for cardiac rhythm management, cardiovascular, and atrial fibrillation therapy areas worldwide. It operates in two divisions, Implantable Electronic Systems, and Cardiovascular and Ablation Technologies. The stock currently has a dividend yield of 1.6%. STJ has a PE ratio of 17.9. Currently there are 13 analysts that rate St Jude Medical a buy, 1 analyst rates it a sell, and 7 rate it a hold.

The average volume for St Jude Medical has been 2.1 million shares per day over the past 30 days. St Jude Medical has a market cap of $17.8 billion and is part of the health care sector and health services industry. The stock has a beta of 1.51 and a short float of 1.1% with 1.52 days to cover. Shares are up 2% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates St Jude Medical as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income, reasonable valuation levels and solid stock price performance. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • STJ's revenue growth has slightly outpaced the industry average of 2.7%. Since the same quarter one year prior, revenues slightly increased by 3.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • ST JUDE MEDICAL INC has improved earnings per share by 7.7% 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. We feel that this trend should continue. During the past fiscal year, ST JUDE MEDICAL INC increased its bottom line by earning $2.50 versus $2.40 in the prior year. This year, the market expects an improvement in earnings ($3.98 versus $2.50).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the Health Care Equipment & Supplies industry average, but is less than that of the S&P 500. The net income increased by 2.5% when compared to the same quarter one year prior, going from $120.00 million to $123.00 million.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 48.24% over the past year, a rise that has exceeded that of the S&P 500 Index. 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.

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