Today's Weak On High Volume Stock: Pharmerica (PMC)

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 Pharmerica ( PMC) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Pharmerica as such a stock due to the following factors:

  • PMC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $7.8 million.
  • PMC has traded 72,682 shares today.
  • PMC is trading at 6.32 times the normal volume for the stock at this time of day.
  • PMC is trading at a new low 4.02% below yesterday's close.

'Weak on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as material stock news, analyst downgrades, insider selling, selling from 'superinvestors,' or that hedge funds and traders are piling out of a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize (or avoid losses by trimming weak positions). In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on PMC:

PharMerica Corporation operates as an institutional pharmacy services company in the United States. The company offers services to healthcare facilities; pharmacy management services to hospitals; specialty infusion services to patients outside hospitals; and oncology pharmacy services. PMC has a PE ratio of 81.8. Currently there are 4 analysts that rate Pharmerica a buy, 1 analyst rates it a sell, and 1 rates it a hold.

The average volume for Pharmerica has been 345,700 shares per day over the past 30 days. Pharmerica has a market cap of $919.8 million and is part of the services sector and retail industry. The stock has a beta of 1.19 and a short float of 6% with 6.07 days to cover. Shares are up 46.2% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Pharmerica as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and increase in stock price during the past year. We feel its 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 18.5%. Since the same quarter one year prior, revenues rose by 16.2%. 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.
  • The debt-to-equity ratio is somewhat low, currently at 0.73, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.30, which illustrates the ability to avoid short-term cash problems.
  • Net operating cash flow has significantly increased by 1272.97% to $50.80 million when compared to the same quarter last year. In addition, PHARMERICA CORP has also vastly surpassed the industry average cash flow growth rate of 68.02%.
  • PHARMERICA CORP's earnings per share declined by 33.3% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, PHARMERICA CORP reported lower earnings of $0.22 versus $0.63 in the prior year. This year, the market expects an improvement in earnings ($1.61 versus $0.22).
  • 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. 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. We feel, however, that the other strengths this company displays justify these higher price levels.

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