CVS Health (CVS) Showing 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.

Trade-Ideas LLC identified CVS Health ( CVS) 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 CVS Health as such a stock due to the following factors:

  • CVS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $539.6 million.
  • CVS has traded 332,038 shares today.
  • CVS traded in a range 222.7% of the normal price range with a price range of $2.88.
  • CVS traded below its daily resistance level (quality: 87 days, meaning that the stock is crossing a resistance level set by the last 87 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 CVS:

CVS Health Corporation, together with its subsidiaries, provides integrated pharmacy health care services in the United States. The company operates through Pharmacy Services and Retail Pharmacy segments. The stock currently has a dividend yield of 1.4%. CVS has a PE ratio of 25.4. Currently there are 16 analysts that rate CVS Health a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for CVS Health has been 4.6 million shares per day over the past 30 days. CVS Health has a market cap of $114.3 billion and is part of the health care sector and health services industry. The stock has a beta of 1.00 and a short float of 0.9% with 1.84 days to cover. Shares are up 4.5% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates CVS Health as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, good cash flow from operations, solid stock price performance and increase in net income. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 0.5%. Since the same quarter one year prior, revenues rose by 12.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • CVS HEALTH CORP has improved earnings per share by 8.6% 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, CVS HEALTH CORP increased its bottom line by earning $3.96 versus $3.75 in the prior year. This year, the market expects an improvement in earnings ($5.16 versus $3.96).
  • Net operating cash flow has significantly increased by 122.56% to $3,423.00 million when compared to the same quarter last year. In addition, CVS HEALTH CORP has also vastly surpassed the industry average cash flow growth rate of 30.49%.
  • 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 38.02% 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 net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Food & Staples Retailing industry average. The net income increased by 4.4% when compared to the same quarter one year prior, going from $1,265.00 million to $1,321.00 million.

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