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 Zimmer Holdings ( ZMH) 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 Zimmer Holdings as such a stock due to the following factors:

  • ZMH has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $124.9 million.
  • ZMH has traded 764,801 shares today.
  • ZMH traded in a range 220.4% of the normal price range with a price range of $2.97.
  • ZMH traded below its daily resistance level (quality: 29 days, meaning that the stock is crossing a resistance level set by the last 29 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 ZMH:

Zimmer Holdings, Inc., through its subsidiaries, designs, develops, manufactures, and markets orthopedic reconstructive devices, spinal and trauma devices, biologics, dental implants, and related surgical products in the Americas, Europe, and the Asia Pacific. The stock currently has a dividend yield of 0.9%. ZMH has a PE ratio of 21.0. Currently there are 13 analysts that rate Zimmer Holdings a buy, no analysts rate it a sell, and 7 rate it a hold.

The average volume for Zimmer Holdings has been 1.2 million shares per day over the past 30 days. Zimmer has a market cap of $17.0 billion and is part of the health care sector and health services industry. The stock has a beta of 0.84 and a short float of 2.4% with 3.71 days to cover. Shares are up 8.1% year-to-date as of the close of trading on Wednesday.

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 Zimmer Holdings as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, increase in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:
  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. 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.
  • ZIMMER HOLDINGS INC has improved earnings per share by 15.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, ZIMMER HOLDINGS INC increased its bottom line by earning $4.43 versus $4.29 in the prior year. This year, the market expects an improvement in earnings ($6.04 versus $4.43).
  • 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 Health Care Equipment & Supplies industry average. The net income increased by 16.0% when compared to the same quarter one year prior, going from $152.10 million to $176.50 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 7.7%. Since the same quarter one year prior, revenues slightly increased by 1.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • ZMH's debt-to-equity ratio is very low at 0.26 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.78, which clearly demonstrates the ability to cover short-term cash needs.

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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