Trade-Ideas: WebMD Health (WBMD) Is Today's

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 WebMD Health ( WBMD) 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 WebMD Health as such a stock due to the following factors:

  • WBMD has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $23.2 million.
  • WBMD has traded 196,600 shares today.
  • WBMD traded in a range 202.7% of the normal price range with a price range of $2.61.
  • WBMD traded above its daily resistance level (quality: 6 days, meaning that the stock is crossing a resistance level set by the last 6 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 WBMD:

WebMD Health Corp. provides health information services to consumers, physicians and other healthcare professionals, employers, and health plans through its public and private online portals, mobile platforms, and health-focused publications in the United States. WBMD has a PE ratio of 43.3. Currently there are 3 analysts that rate WebMD Health a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for WebMD Health has been 371,100 shares per day over the past 30 days. WebMD Health has a market cap of $1.6 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 0.49 and a short float of 14% with 7.88 days to cover. Shares are up 6.3% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates WebMD Health as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including relatively poor performance when compared with the S&P 500 during the past year and generally higher debt management risk.

Highlights from the ratings report include:
  • WBMD's revenue growth has slightly outpaced the industry average of 5.8%. Since the same quarter one year prior, revenues rose by 11.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • WEBMD HEALTH CORP has improved earnings per share by 44.0% 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. This trend suggests that the performance of the business is improving. During the past fiscal year, WEBMD HEALTH CORP increased its bottom line by earning $0.97 versus $0.33 in the prior year. This year, the market expects an improvement in earnings ($1.29 versus $0.97).
  • Net operating cash flow has increased to $32.29 million or 33.53% when compared to the same quarter last year. Despite an increase in cash flow, WEBMD HEALTH CORP's average is still marginally south of the industry average growth rate of 43.24%.
  • In its most recent trading session, WBMD has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
  • The debt-to-equity ratio is very high at 15.46 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 5.19, which shows the ability to cover short-term cash needs.

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