Varian Medical Systems (VAR) Is Water-Logged And Getting Wetter Today

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 Varian Medical Systems ( VAR) 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 Varian Medical Systems as such a stock due to the following factors:

  • VAR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $33.2 million.
  • VAR has traded 309,339 shares today.
  • VAR traded in a range 249.1% of the normal price range with a price range of $1.99.
  • VAR traded below its daily resistance level (quality: 39 days, meaning that the stock is crossing a resistance level set by the last 39 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 VAR:

Varian Medical Systems, Inc. designs, manufactures, sells, and services medical devices and software for treating cancer and other medical conditions with radiotherapy, radiosurgery, proton therapy, and brachytherapy worldwide. VAR has a PE ratio of 22.1. Currently there are 6 analysts that rate Varian Medical Systems a buy, 1 analyst rates it a sell, and none rate it a hold.

The average volume for Varian Medical Systems has been 553,200 shares per day over the past 30 days. Varian Medical Systems has a market cap of $8.9 billion and is part of the health care sector and health services industry. The stock has a beta of 0.72 and a short float of 5.6% with 13.76 days to cover. Shares are up 9.8% year-to-date as of the close of trading on Friday.

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 Varian Medical Systems as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins, increase in stock price during the past year and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 7.4%. Since the same quarter one year prior, revenues slightly increased by 3.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • VAR's debt-to-equity ratio is very low at 0.28 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.43, which illustrates the ability to avoid short-term cash problems.
  • 45.35% is the gross profit margin for VARIAN MEDICAL SYSTEMS INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 14.32% is above that of the industry average.
  • VARIAN MEDICAL SYSTEMS INC reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, VARIAN MEDICAL SYSTEMS INC increased its bottom line by earning $3.99 versus $3.77 in the prior year. This year, the market expects an improvement in earnings ($4.25 versus $3.99).
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. 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.

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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