Amgen (AMGN) Showing Signs Of Being A Roof Leaker

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 Amgen ( AMGN) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Amgen as such a stock due to the following factors:

  • AMGN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $515.5 million.
  • AMGN has traded 1.6 million shares today.
  • AMGN is trading at 7.16 times the normal volume for the stock at this time of day.
  • AMGN crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

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More details on AMGN:

Amgen Inc., a biotechnology company, discovers, develops, manufactures, and delivers human therapeutics in the areas of oncology, hematology, inflammation, bone health, nephrology, cardiovascular, and general medicine worldwide. The stock currently has a dividend yield of 1.9%. AMGN has a PE ratio of 19.2. Currently there are 7 analysts that rate Amgen a buy, no analysts rate it a sell, and 11 rate it a hold.

The average volume for Amgen has been 3.7 million shares per day over the past 30 days. Amgen has a market cap of $88.5 billion and is part of the health care sector and drugs industry. The stock has a beta of 0.37 and a short float of 1.6% with 2.36 days to cover. Shares are up 4.6% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Amgen as a buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, revenue growth, notable return on equity and reasonable valuation levels. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:
  • AMGEN INC has improved earnings per share by 31.7% 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 two years. We feel that this trend should continue. During the past fiscal year, AMGEN INC increased its bottom line by earning $6.65 versus $5.51 in the prior year. This year, the market expects an improvement in earnings ($8.13 versus $6.65).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the Biotechnology industry average, but is less than that of the S&P 500. The net income increased by 29.6% when compared to the same quarter one year prior, rising from $788.00 million to $1,021.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 15.4%. Since the same quarter one year prior, revenues rose by 13.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Biotechnology industry and the overall market, AMGEN INC's return on equity exceeds that of both the industry average and the S&P 500.

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