Bright Horizons Family Solutions (BFAM) Showing Signs Of Being Strong And Under The Radar

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 Bright Horizons Family Solutions ( BFAM) as a strong and under the radar candidate. In addition to specific proprietary factors, Trade-Ideas identified Bright Horizons Family Solutions as such a stock due to the following factors:

  • BFAM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $9.1 million.
  • BFAM is making at least a new 3-day high.
  • BFAM has a PE ratio of 47.5.
  • BFAM is mentioned 0.84 times per day on StockTwits.
  • BFAM has not yet been mentioned on StockTwits today.
  • BFAM is currently in the upper 20% of its 1-year range.
  • BFAM is in the upper 35% of its 20-day range.
  • BFAM is in the upper 45% of its 5-day range.
  • BFAM is currently trading above yesterday's high.

'Strong and Under the Radar' stocks tend to be worthwhile stocks to watch for a variety of factors including historical back testing and price action. Market technicians refer to such stocks as being in an accumulation phase before a mark-up and peak. Traders and hedge funds have frequently found that these types of stocks continue to build a solid price base and then ultimately spike higher and peak when others 'discover' how good the stock is performing. By leveraging the social discovery aspect of StockTwits we are highlighting stocks that don't currently receive much attention from retail investors, but we suspect may soon garner more attention.

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More details on BFAM:

Bright Horizons Family Solutions Inc. provides child care, early education, and other services for employers and families. It operates through three segments: Full-Service Center-Based Child Care, Back-Up Dependent Care, and Other Educational Advisory Services. BFAM has a PE ratio of 47.5. Currently there are 5 analysts that rate Bright Horizons Family Solutions a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Bright Horizons Family Solutions has been 160,900 shares per day over the past 30 days. Bright Horizons Family has a market cap of $3.1 billion and is part of the services sector and diversified services industry. The stock has a beta of 0.48 and a short float of 2.9% with 4.64 days to cover. Shares are up 8.2% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Bright Horizons Family Solutions as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, good cash flow from operations and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 11.0%. Since the same quarter one year prior, revenues slightly increased by 5.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, BFAM's share price has jumped by 26.49%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • BRIGHT HORIZONS FAMILY SOLTN's earnings per share declined by 20.0% 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, BRIGHT HORIZONS FAMILY SOLTN increased its bottom line by earning $1.07 versus $0.15 in the prior year. This year, the market expects an improvement in earnings ($1.73 versus $1.07).
  • Net operating cash flow has increased to $52.99 million or 38.65% when compared to the same quarter last year. Despite an increase in cash flow of 38.65%, BRIGHT HORIZONS FAMILY SOLTN is still growing at a significantly lower rate than the industry average of 134.13%.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to the other companies in the Diversified Consumer Services industry and the overall market, BRIGHT HORIZONS FAMILY SOLTN's return on equity is significantly below that of the industry average and is below that of the S&P 500.

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