Watch Out: Barbarians At The Gate For Jazz Pharmaceuticals (JAZZ)

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 Jazz Pharmaceuticals ( JAZZ) 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 Jazz Pharmaceuticals as such a stock due to the following factors:

  • JAZZ has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $156.7 million.
  • JAZZ has traded 1.6 million shares today.
  • JAZZ traded in a range 200.3% of the normal price range with a price range of $11.43.
  • JAZZ traded above its daily resistance level (quality: 6 days, meaning that the stock is crossing a resistance level set by the last 6 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 JAZZ:

Jazz Pharmaceuticals Public Limited Company, a specialty biopharmaceutical company, identifies, develops, and commercializes pharmaceutical products for various medical needs in the United States, Europe, and internationally. JAZZ has a PE ratio of 103.8. Currently there are 9 analysts that rate Jazz Pharmaceuticals a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Jazz Pharmaceuticals has been 854,200 shares per day over the past 30 days. Jazz has a market cap of $8.1 billion and is part of the health care sector and drugs industry. The stock has a beta of 0.38 and a short float of 2.9% with 1.78 days to cover. Shares are up 4.7% year-to-date as of the close of trading on Tuesday.

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 Jazz Pharmaceuticals as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in net income, good cash flow from operations, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 4.6%. Since the same quarter one year prior, revenues rose by 39.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • 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 3.5% when compared to the same quarter one year prior, going from $42.19 million to $43.66 million.
  • Net operating cash flow has significantly increased by 759.31% to $74.92 million when compared to the same quarter last year. In addition, JAZZ PHARMACEUTICALS PLC has also vastly surpassed the industry average cash flow growth rate of -4.12%.
  • The gross profit margin for JAZZ PHARMACEUTICALS PLC is currently very high, coming in at 90.94%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 14.99% trails the industry average.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 65.50% over the past year, a rise that has exceeded that of the S&P 500 Index. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

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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