Watch Out: Barbarians At The Gate For DaVita HealthCare Partners (DVA)

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 DaVita HealthCare Partners ( DVA) 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 DaVita HealthCare Partners as such a stock due to the following factors:

  • DVA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $73.0 million.
  • DVA has traded 52,815 shares today.
  • DVA traded in a range 209.9% of the normal price range with a price range of $2.62.
  • DVA traded above its daily resistance level (quality: 5 days, meaning that the stock is crossing a resistance level set by the last 5 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 DVA:

DaVita HealthCare Partners Inc. provides kidney dialysis services for patients suffering from chronic kidney failure or end stage renal disease (ESRD). The company operates in two divisions, Kidney Care and HealthCare Partners. DVA has a PE ratio of 24.7. Currently there are 6 analysts that rate DaVita HealthCare Partners a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for DaVita HealthCare Partners has been 1.3 million shares per day over the past 30 days. DaVita HealthCare has a market cap of $17.7 billion and is part of the health care sector and health services industry. The stock has a beta of 0.75 and a short float of 2.7% with 4.74 days to cover. Shares are up 8.8% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates DaVita HealthCare Partners as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • DVA's revenue growth trails the industry average of 18.9%. Since the same quarter one year prior, revenues slightly increased by 8.6%. 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.
  • DAVITA HEALTHCARE PARTNERS' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, DAVITA HEALTHCARE PARTNERS increased its bottom line by earning $3.34 versus $2.90 in the prior year. This year, the market expects an improvement in earnings ($3.72 versus $3.34).
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • Currently the debt-to-equity ratio of 1.64 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Regardless of the company's weak debt-to-equity ratio, DVA has managed to keep a strong quick ratio of 1.58, which demonstrates the ability to cover short-term cash needs.
  • 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 on the basis of return on equity, DAVITA HEALTHCARE PARTNERS has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.

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