Perrigo (PRGO) 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 Perrigo ( PRGO) 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 Perrigo as such a stock due to the following factors:

  • PRGO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $127.7 million.
  • PRGO has traded 704,800 shares today.
  • PRGO traded in a range 432.9% of the normal price range with a price range of $10.59.
  • PRGO traded below its daily resistance level (quality: 110 days, meaning that the stock is crossing a resistance level set by the last 110 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 PRGO:

Perrigo Company plc, through its subsidiaries, develops, manufactures, and distributes over-the-counter (OTC) and generic prescription (Rx) pharmaceuticals, nutritional products, and active pharmaceutical ingredients (API). The stock currently has a dividend yield of 0.3%. PRGO has a PE ratio of 81.6. Currently there are 13 analysts that rate Perrigo a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Perrigo has been 1.2 million shares per day over the past 30 days. Perrigo has a market cap of $19.3 billion and is part of the health care sector and drugs industry. The stock has a beta of 0.07 and a short float of 2.3% with 3.05 days to cover. Shares are down 6.4% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Perrigo 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, increase in net income, good cash flow from operations and expanding profit margins. 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 came in higher than the industry average of 4.8%. Since the same quarter one year prior, revenues rose by 18.3%. 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.
  • The current debt-to-equity ratio, 0.37, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, PRGO has a quick ratio of 1.62, which demonstrates the ability of the company to cover short-term liquidity needs.
  • 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 11.4% when compared to the same quarter one year prior, going from $118.44 million to $131.90 million.
  • Net operating cash flow has significantly increased by 68.52% to $292.70 million when compared to the same quarter last year. In addition, PERRIGO CO PLC has also vastly surpassed the industry average cash flow growth rate of -1.01%.
  • 46.94% is the gross profit margin for PERRIGO CO PLC which we consider to be strong. 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 11.52% trails 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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