Watch Out: Barbarians At The Gate For Wright Medical Group (WMGI)

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 Wright Medical Group ( WMGI) 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 Wright Medical Group as such a stock due to the following factors:

  • WMGI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $21.0 million.
  • WMGI has traded 1.1 million shares today.
  • WMGI traded in a range 201.9% of the normal price range with a price range of $1.47.
  • WMGI traded above its daily resistance level (quality: 79 days, meaning that the stock is crossing a resistance level set by the last 79 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 WMGI:

Wright Medical Group, Inc., a specialty orthopaedic company, provides extremity and biologic solutions that enable clinicians to alleviate pain and restore their patients' lifestyles. Currently there are 7 analysts that rate Wright Medical Group a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Wright Medical Group has been 563,300 shares per day over the past 30 days. Wright Medical Group has a market cap of $1.6 billion and is part of the health care sector and health services industry. The stock has a beta of 0.09 and a short float of 10.6% with 8.23 days to cover. Shares are up 1.4% 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 Wright Medical Group as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Health Care Equipment & Supplies industry. The net income has significantly decreased by 224.4% when compared to the same quarter one year ago, falling from -$17.33 million to -$56.23 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Health Care Equipment & Supplies industry and the overall market, WRIGHT MEDICAL GROUP INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$24.35 million or 322.92% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • WRIGHT MEDICAL GROUP INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, WRIGHT MEDICAL GROUP INC reported poor results of -$6.02 versus -$0.10 in the prior year. This year, the market expects an improvement in earnings (-$1.34 versus -$6.02).
  • The gross profit margin for WRIGHT MEDICAL GROUP INC is currently very high, coming in at 79.56%. Regardless of WMGI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, WMGI's net profit margin of -77.69% significantly underperformed when compared to the industry average.

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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