Watch Out: Barbarians At The Gate For HMS Holdings (HMSY)

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 HMS Holdings ( HMSY) 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 HMS Holdings as such a stock due to the following factors:

  • HMSY has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $20.1 million.
  • HMSY has traded 337,734 shares today.
  • HMSY traded in a range 231.5% of the normal price range with a price range of $1.17.
  • HMSY traded above its daily resistance level (quality: 35 days, meaning that the stock is crossing a resistance level set by the last 35 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 HMSY:

HMS Holdings Corp. provides cost containment services to government and private healthcare payers and sponsors. The company's services include co-ordination of benefits and program integrity services. HMSY has a PE ratio of 45.9. Currently there are 5 analysts that rate HMS Holdings a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for HMS Holdings has been 886,500 shares per day over the past 30 days. HMS has a market cap of $1.7 billion and is part of the services sector and diversified services industry. The stock has a beta of 0.27 and a short float of 16.8% with 12.41 days to cover. Shares are down 18.2% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates HMS Holdings as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • The current debt-to-equity ratio, 0.39, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 3.21, which clearly demonstrates the ability to cover short-term cash needs.
  • 36.25% is the gross profit margin for HMS HOLDINGS CORP which we consider to be strong. Regardless of HMSY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 3.20% trails the industry average.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Health Care Technology industry. The net income has significantly decreased by 51.9% when compared to the same quarter one year ago, falling from $6.98 million to $3.35 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Health Care Technology industry and the overall market, HMS HOLDINGS CORP's return on equity is below that of both the industry average and the S&P 500.

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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