Watch Out: Barbarians At The Gate For Brookdale Senior Living (BKD)

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 Brookdale Senior Living ( BKD) 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 Brookdale Senior Living as such a stock due to the following factors:

  • BKD has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $97.7 million.
  • BKD has traded 88,704 shares today.
  • BKD traded in a range 277% of the normal price range with a price range of $2.31.
  • BKD traded above its daily resistance level (quality: 24 days, meaning that the stock is crossing a resistance level set by the last 24 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 BKD:

Brookdale Senior Living Inc. owns and operates senior living communities in the United States. It operates through five segments: Retirement Centers, Assisted Living, Continuing Care Retirement Communities (CCRCs)-Rental, Brookdale Ancillary Services, and Management Services. Currently there are 7 analysts that rate Brookdale Senior Living a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Brookdale Senior Living has been 2.0 million shares per day over the past 30 days. Brookdale Senior Living has a market cap of $6.7 billion and is part of the health care sector and health services industry. The stock has a beta of 1.86 and a short float of 7.2% with 3.53 days to cover. Shares are down 1.5% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Brookdale Senior Living as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity.

Highlights from the ratings report include:
  • BKD's very impressive revenue growth greatly exceeded the industry average of 18.9%. Since the same quarter one year prior, revenues leaped by 70.5%. 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 where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • BROOKDALE SENIOR LIVING INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, BROOKDALE SENIOR LIVING INC reported poor results of -$0.86 versus -$0.03 in the prior year. This year, the market expects an improvement in earnings ($2.68 versus -$0.86).
  • The gross profit margin for BROOKDALE SENIOR LIVING INC is rather low; currently it is at 20.64%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -8.50% is significantly below that of the industry average.
  • Net operating cash flow has decreased to $85.80 million or 26.69% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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