Water-Logged And Getting Wetter: McKesson (MCK)

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 McKesson ( MCK) 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 McKesson as such a stock due to the following factors:

  • MCK has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $179.5 million.
  • MCK has traded 1.1 million shares today.
  • MCK traded in a range 221.4% of the normal price range with a price range of $6.72.
  • MCK traded below its daily resistance level (quality: 34 days, meaning that the stock is crossing a resistance level set by the last 34 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 MCK:

McKesson Corporation delivers pharmaceuticals, medical supplies, and health care information technologies to the healthcare industry in the United States and internationally. The company operates in two segments, McKesson Distribution Solutions and McKesson Technology Solutions. The stock currently has a dividend yield of 0.5%. MCK has a PE ratio of 34.9. Currently there are 13 analysts that rate McKesson a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for McKesson has been 1.0 million shares per day over the past 30 days. McKesson has a market cap of $48.6 billion and is part of the services sector and wholesale industry. The stock has a beta of 0.69 and a short float of 0.6% with 1.63 days to cover. Shares are up 27.2% year-to-date as of the close of trading on Friday.

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 McKesson as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, growth in earnings per share, increase in net income, solid stock price performance and notable return on equity. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 19.8%. Since the same quarter one year prior, revenues rose by 35.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • MCKESSON CORP has improved earnings per share by 12.6% 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 two years. We feel that this trend should continue. During the past fiscal year, MCKESSON CORP increased its bottom line by earning $5.89 versus $5.62 in the prior year. This year, the market expects an improvement in earnings ($10.84 versus $5.89).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Health Care Providers & Services industry average. The net income increased by 16.1% when compared to the same quarter one year prior, going from $404.00 million to $469.00 million.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 32.36% over the past year, a rise that has exceeded that of the S&P 500 Index. Looking ahead, the stock's sharp 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 other strengths this company displays justify these higher price levels.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Health Care Providers & Services industry and the overall market, MCKESSON CORP's return on equity exceeds 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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