Omnicare (OCR) Is Today's Roof Leaker Stock

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 Omnicare ( OCR) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Omnicare as such a stock due to the following factors:

  • OCR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $56.3 million.
  • OCR has traded 41,818 shares today.
  • OCR is trading at 2.14 times the normal volume for the stock at this time of day.
  • OCR crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

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More details on OCR:

Omnicare, Inc. operates as a healthcare services company that specializes in the management of pharmaceutical care in the United States and Canada. It operates through two segments, Long-Term Care Group and Specialty Care Group. The stock currently has a dividend yield of 1.3%. OCR has a PE ratio of 58.8. Currently there are 5 analysts that rate Omnicare a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Omnicare has been 783,200 shares per day over the past 30 days. Omnicare has a market cap of $6.2 billion and is part of the health care sector and health services industry. The stock has a beta of 1.07 and a short float of 10.5% with 10.43 days to cover. Shares are up 3.7% year-to-date as of the close of trading on Monday.

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 Omnicare as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures, increase in stock price during the past year and growth in earnings per share. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • OCR's revenue growth trails the industry average of 20.4%. Since the same quarter one year prior, revenues slightly increased by 7.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Net operating cash flow has increased to $218.88 million or 42.34% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 11.01%.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Looking ahead, the stock's 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 the other strengths this company displays justify these higher price levels.
  • OMNICARE INC has improved earnings per share by 34.9% 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, OMNICARE INC reported lower earnings of $0.74 versus $1.52 in the prior year. This year, the market expects an improvement in earnings ($3.70 versus $0.74).
  • The debt-to-equity ratio is somewhat low, currently at 0.66, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.92 is somewhat weak and could be cause for future problems.

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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