Barbarian At The Gate: Thoratec (THOR)

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 Thoratec ( THOR) 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 Thoratec as such a stock due to the following factors:

  • THOR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $21.6 million.
  • THOR has traded 102,394 shares today.
  • THOR traded in a range 206.3% of the normal price range with a price range of $1.03.
  • THOR traded above its daily resistance level (quality: 46 days, meaning that the stock is crossing a resistance level set by the last 46 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 THOR:

Thoratec Corporation develops, manufactures, and markets proprietary medical devices used for mechanical circulatory support for the treatment of heart failure patients. THOR has a PE ratio of 22.6. Currently there are 6 analysts that rate Thoratec a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for Thoratec has been 946,000 shares per day over the past 30 days. Thoratec has a market cap of $1.5 billion and is part of the health care sector and health services industry. The stock has a beta of 0.80 and a short float of 5.6% with 5.02 days to cover. Shares are down 28.6% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Thoratec 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 expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and unimpressive growth in net income.

Highlights from the ratings report include:
  • THOR has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 5.38, which clearly demonstrates the ability to cover short-term cash needs.
  • THORATEC CORP's earnings per share declined by 25.0% in the most recent quarter compared to the same quarter a year ago. 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, THORATEC CORP increased its bottom line by earning $1.26 versus $0.94 in the prior year. This year, the market expects an improvement in earnings ($1.35 versus $1.26).
  • Looking at the price performance of THOR's shares over the past 12 months, there is not much good news to report: the stock is down 29.87%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, THOR is still more expensive than most of the other companies in its industry.
  • 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 Equipment & Supplies industry. The net income has decreased by 24.9% when compared to the same quarter one year ago, dropping from $23.19 million to $17.41 million.

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