Tenet Healthcare (THC) Shows Signs Of Being 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 Tenet Healthcare ( THC) 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 Tenet Healthcare as such a stock due to the following factors:

  • THC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $72.8 million.
  • THC has traded 1.4 million shares today.
  • THC traded in a range 218.1% of the normal price range with a price range of $4.51.
  • THC traded below its daily resistance level (quality: 19 days, meaning that the stock is crossing a resistance level set by the last 19 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 THC:

Tenet Healthcare Corporation, an investor-owned health care services company, primarily operates acute care hospitals and related health care facilities in the United States. Currently there are 9 analysts that rate Tenet Healthcare a buy, 1 analyst rates it a sell, and 6 rate it a hold.

The average volume for Tenet Healthcare has been 1.5 million shares per day over the past 30 days. Tenet Healthcare has a market cap of $5.5 billion and is part of the health care sector and health services industry. The stock has a beta of 1.26 and a short float of 9.8% with 5.93 days to cover. Shares are up 34.7% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Tenet Healthcare as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and increase in net income. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and poor profit margins.

Highlights from the ratings report include:
  • THC's very impressive revenue growth greatly exceeded the industry average of 19.5%. Since the same quarter one year prior, revenues leaped by 66.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • TENET HEALTHCARE CORP reported significant earnings per share improvement 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, TENET HEALTHCARE CORP swung to a loss, reporting -$1.20 versus $1.72 in the prior year. This year, the market expects an improvement in earnings ($1.42 versus -$1.20).
  • The gross profit margin for TENET HEALTHCARE CORP is currently extremely low, coming in at 11.38%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -0.64% trails that of the industry average.
  • The debt-to-equity ratio is very high at 15.99 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, THC maintains a poor quick ratio of 0.77, which illustrates the inability to avoid short-term cash 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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