Laboratory Corp Of America Hldgs (LH) Marked As A Barbarian At The Gate

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 Laboratory Corp of America Hldgs ( LH) 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 Laboratory Corp of America Hldgs as such a stock due to the following factors:

  • LH has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $168.5 million.
  • LH has traded 354,035 shares today.
  • LH traded in a range 252.3% of the normal price range with a price range of $3.77.
  • LH traded above its daily resistance level (quality: 23 days, meaning that the stock is crossing a resistance level set by the last 23 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 LH:

Laboratory Corporation of America Holdings operates as an independent clinical laboratory company worldwide. LH has a PE ratio of 26. Currently there are 14 analysts that rate Laboratory Corp of America Hldgs a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Laboratory Corp of America Hldgs has been 1.1 million shares per day over the past 30 days. Laboratory Corp of America Hldgs has a market cap of $12.0 billion and is part of the health care sector and health services industry. The stock has a beta of 0.61 and a short float of 3.7% with 2.69 days to cover. Shares are up 11.6% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Laboratory Corp of America Hldgs as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 13.3%. Since the same quarter one year prior, revenues rose by 25.3%. 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.
  • 39.15% is the gross profit margin for LABORATORY CP OF AMER HLDGS which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 0.03% trails the industry average.
  • LABORATORY CP OF AMER HLDGS 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 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, LABORATORY CP OF AMER HLDGS reported lower earnings of $5.93 versus $6.24 in the prior year. This year, the market expects an improvement in earnings ($7.75 versus $5.93).
  • 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. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • Currently the debt-to-equity ratio of 1.54 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Even though the debt-to-equity ratio is weak, LH's quick ratio is somewhat strong at 1.27, demonstrating the ability to handle short-term liquidity needs.

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