Amgen (AMGN) Roof Leaking Today

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 $276.4 million.
  • AMGN has traded 1.0 million shares today.
  • AMGN is trading at 1.61 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 2%. AMGN has a PE ratio of 19.4. Currently there are 8 analysts that rate Amgen a buy, no analysts rate it a sell, and 10 rate it a hold.

The average volume for Amgen has been 3.2 million shares per day over the past 30 days. Amgen has a market cap of $90.7 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 1.3% with 3.67 days to cover. Shares are up 5% year-to-date as of the close of trading on Monday.

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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 revenue growth, reasonable valuation levels, good cash flow from operations, increase in stock price during the past year and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • AMGN's revenue growth trails the industry average of 26.8%. Since the same quarter one year prior, revenues slightly increased by 6.7%. 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.
  • Net operating cash flow has slightly increased to $1,142.00 million or 8.86% when compared to the same quarter last year. Despite an increase in cash flow, AMGEN INC's average is still marginally south of the industry average growth rate of 16.87%.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. 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.
  • AMGEN INC's earnings per share declined by 25.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. 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 ($8.10 versus $6.65).

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