Mylan (MYL) Is Today's Roof Leaker Stock

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 Mylan ( MYL) 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 Mylan as such a stock due to the following factors:

  • MYL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $248.6 million.
  • MYL has traded 5.4 million shares today.
  • MYL is trading at 3.45 times the normal volume for the stock at this time of day.
  • MYL 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 MYL:

Mylan Inc., a pharmaceutical company, develops, licenses, manufactures, markets, and distributes generic, branded generic, and specialty pharmaceuticals worldwide. It operates in two segments, Generics and Specialty. MYL has a PE ratio of 29.9. Currently there are 12 analysts that rate Mylan a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Mylan has been 4.0 million shares per day over the past 30 days. Mylan has a market cap of $18.1 billion and is part of the health care sector and drugs industry. The stock has a beta of 1.14 and a short float of 7.3% with 5.89 days to cover. Shares are up 10.4% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Mylan 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, good cash flow from operations and expanding profit margins. 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:
  • The revenue growth came in higher than the industry average of 5.4%. Since the same quarter one year prior, revenues slightly increased by 5.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • MYLAN INC has improved earnings per share by 7.4% 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, MYLAN INC increased its bottom line by earning $1.58 versus $1.53 in the prior year. This year, the market expects an improvement in earnings ($3.38 versus $1.58).
  • 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 Pharmaceuticals industry average. The net income increased by 8.4% when compared to the same quarter one year prior, going from $106.88 million to $115.90 million.
  • Net operating cash flow has significantly increased by 206.18% to $268.10 million when compared to the same quarter last year. In addition, MYLAN INC has also vastly surpassed the industry average cash flow growth rate of -66.20%.
  • The gross profit margin for MYLAN INC is rather high; currently it is at 52.51%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, MYL's net profit margin of 6.75% significantly trails the industry average.

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