Boston Scientific (BSX) Spotted As Roof Leaker Today

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 Boston Scientific ( BSX) 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 Boston Scientific as such a stock due to the following factors:

  • BSX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $196.2 million.
  • BSX has traded 2.0 million shares today.
  • BSX is trading at 3.85 times the normal volume for the stock at this time of day.
  • BSX 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 BSX:

Boston Scientific Corporation develops, manufactures, and markets medical devices for use in various interventional medical specialties worldwide. The company operates in three segments: Cardiovascular, Rhythm Management, and MedSurg. BSX has a PE ratio of 65.1. Currently there are 12 analysts that rate Boston Scientific a buy, no analysts rate it a sell, and 11 rate it a hold.

The average volume for Boston Scientific has been 13.4 million shares per day over the past 30 days. Boston Scientific has a market cap of $18.1 billion and is part of the health care sector and health services industry. The stock has a beta of 1.36 and a short float of 3.3% with 2.43 days to cover. Shares are up 8.9% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Boston Scientific as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income and good cash flow from operations. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet.

Highlights from the ratings report include:
  • BSX's revenue growth has slightly outpaced the industry average of 6.3%. Since the same quarter one year prior, revenues slightly increased by 6.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • BOSTON SCIENTIFIC CORP has shown improvement in its earnings for its most recently reported quarter when compared with the same quarter a year earlier. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, BOSTON SCIENTIFIC CORP continued to lose money by earning -$0.08 versus -$2.87 in the prior year. This year, the market expects an improvement in earnings ($0.83 versus -$0.08).
  • This stock has managed to rise its share value by 12.40% over the past twelve months. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
  • BSX's debt-to-equity ratio of 0.63 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.81 is weak.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Health Care Equipment & Supplies industry and the overall market, BOSTON SCIENTIFIC CORP's return on equity is below that of both the industry average and the S&P 500.

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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