WageWorks (WAGE) Marked As A Barbarian At The Gate

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 WageWorks ( WAGE) 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 WageWorks as such a stock due to the following factors:

  • WAGE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $20.4 million.
  • WAGE has traded 99,056 shares today.
  • WAGE traded in a range 263.6% of the normal price range with a price range of $4.05.
  • WAGE traded above its daily resistance level (quality: 227 days, meaning that the stock is crossing a resistance level set by the last 227 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 WAGE:

WageWorks, Inc. provides consumer-directed benefits programs (CDBs) to employees to save money on taxes in the United States. WAGE has a PE ratio of 81.8. Currently there are 4 analysts that rate WageWorks a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for WageWorks has been 334,900 shares per day over the past 30 days. WageWorks has a market cap of $1.9 billion and is part of the services sector and diversified services industry. The stock has a beta of 0.19 and a short float of 7.8% with 8.19 days to cover. Shares are down 7% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates WageWorks as a hold. 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 and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including premium valuation and weak operating cash flow.

Highlights from the ratings report include:
  • WAGE's revenue growth has slightly outpaced the industry average of 3.2%. Since the same quarter one year prior, revenues slightly increased by 7.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • WAGE's debt-to-equity ratio is very low at 0.12 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.25, which illustrates the ability to avoid short-term cash problems.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. 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, implying reduced upside potential.
  • Net operating cash flow has decreased to $20.52 million or 15.73% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

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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