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 Health Net ( HNT) 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 Health Net as such a stock due to the following factors:

  • HNT has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $25.7 million.
  • HNT has traded 75,902 shares today.
  • HNT traded in a range 239.9% of the normal price range with a price range of $2.09.
  • HNT traded above its daily resistance level (quality: 532 days, meaning that the stock is crossing a resistance level set by the last 532 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 HNT:

Health Net, Inc. provides managed health care services through health plans and government-sponsored managed care plans in the United States. It operates through Western Region Operations and Government Contracts segments. HNT has a PE ratio of 15.9. Currently there are 2 analysts that rate Health Net a buy, 2 analysts rate it a sell, and 8 rate it a hold.

The average volume for Health Net has been 845,600 shares per day over the past 30 days. Health Net has a market cap of $2.7 billion and is part of the health care sector and health services industry. Shares are up 14.8% 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 Health Net as a buy. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, impressive record of earnings per share growth, compelling growth in net income, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • HEALTH NET INC reported significant earnings per share improvement 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, HEALTH NET INC increased its bottom line by earning $2.12 versus $0.31 in the prior year. This year, the market expects an improvement in earnings ($2.25 versus $2.12).
  • 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 228.6% when compared to the same quarter one year prior, rising from $6.01 million to $19.75 million.
  • The current debt-to-equity ratio, 0.31, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, HNT has a quick ratio of 1.71, which demonstrates the ability of the company to cover short-term liquidity needs.

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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