Cerner (CERN) Is Water-Logged And Getting Wetter 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 Cerner ( CERN) 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 Cerner as such a stock due to the following factors:

  • CERN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $114.1 million.
  • CERN has traded 1.0 million shares today.
  • CERN traded in a range 283.7% of the normal price range with a price range of $3.17.
  • CERN traded below its daily resistance level (quality: 1 day, meaning that the stock is crossing a resistance level set by the last 1 calendar day. 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 CERN:

Cerner Corporation designs, develops, markets, installs, hosts, and supports healthcare information technology, healthcare devices, hardware, and content solutions for healthcare organizations and consumers worldwide. CERN has a PE ratio of 45.6. Currently there are 14 analysts that rate Cerner a buy, 1 analyst rates it a sell, and 7 rate it a hold.

The average volume for Cerner has been 1.8 million shares per day over the past 30 days. Cerner has a market cap of $18.8 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 0.36 and a short float of 4.7% with 6.69 days to cover. Shares are down 1.1% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Cerner as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, increase in stock price during the past year and increase in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • CERN's revenue growth has slightly outpaced the industry average of 15.9%. Since the same quarter one year prior, revenues rose by 20.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • CERN's debt-to-equity ratio is very low at 0.05 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, CERN has a quick ratio of 2.38, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. 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.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Health Care Technology industry average. The net income increased by 14.3% when compared to the same quarter one year prior, going from $112.91 million to $129.03 million.

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