Watch Out: Barbarians At The Gate For Abbott Laboratories (ABT)

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 Abbott Laboratories ( ABT) 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 Abbott Laboratories as such a stock due to the following factors:

  • ABT has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $190.7 million.
  • ABT has traded 5.0 million shares today.
  • ABT traded in a range 203.5% of the normal price range with a price range of $1.34.
  • ABT traded above its daily resistance level (quality: 532 days, meaning that the stock is crossing a resistance level set by the last 532 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 ABT:

Abbott Laboratories manufactures and sells health care products worldwide. The stock currently has a dividend yield of 2%. ABT has a PE ratio of 35. Currently there are 13 analysts that rate Abbott Laboratories a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Abbott Laboratories has been 4.9 million shares per day over the past 30 days. Abbott has a market cap of $70.2 billion and is part of the health care sector and health services industry. The stock has a beta of 1.05 and a short float of 0.8% with 3.15 days to cover. Shares are up 4.7% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Abbott Laboratories as a hold. 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 and compelling growth in net income. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall.

Highlights from the ratings report include:
  • ABT's revenue growth has slightly outpaced the industry average of 0.6%. Since the same quarter one year prior, revenues slightly increased by 3.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.41, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.45, which illustrates the ability to avoid short-term cash problems.
  • 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. Although other factors naturally played a role, the company's strong earnings growth was key. 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 return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Health Care Equipment & Supplies industry and the overall market, ABBOTT LABORATORIES's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • Net operating cash flow has significantly decreased to $2.00 million or 99.40% 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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