CareFusion (CFN) Falls Further As It's Water-Logged And Getting Wetter

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 CareFusion ( CFN) 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 CareFusion as such a stock due to the following factors:

  • CFN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $81.4 million.
  • CFN has traded 292,150 shares today.
  • CFN traded in a range 207.1% of the normal price range with a price range of $1.17.
  • CFN traded below its daily resistance level (quality: 84 days, meaning that the stock is crossing a resistance level set by the last 84 calendar days. 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 CFN:

CareFusion Corporation, a medical technology company, provides various healthcare products and services. It offers product lines in the areas of medication management, infection prevention, operating room effectiveness, respiratory care, and surveillance and analytics. CFN has a PE ratio of 23.8. Currently there are 5 analysts that rate CareFusion a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for CareFusion has been 1.6 million shares per day over the past 30 days. CareFusion has a market cap of $8.8 billion and is part of the health care sector and health services industry. The stock has a beta of 0.87 and a short float of 1.6% with 1.43 days to cover. Shares are up 5.8% year-to-date as of the close of trading on Thursday.

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 CareFusion as a buy. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, growth in earnings per share, increase in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. 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. 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.
  • CAREFUSION CORP has improved earnings per share by 29.7% 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, CAREFUSION CORP increased its bottom line by earning $1.73 versus $1.60 in the prior year. This year, the market expects an improvement in earnings ($2.31 versus $1.73).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Health Care Equipment & Supplies industry. The net income increased by 21.4% when compared to the same quarter one year prior, going from $84.00 million to $102.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.8%. Since the same quarter one year prior, revenues slightly increased by 7.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Although CFN's debt-to-equity ratio of 0.27 is very low, it is currently higher than that of the industry average. To add to this, CFN has a quick ratio of 1.88, 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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