Steris (STE) Showing Signs Of Being Water-Logged And Getting Wetter

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 Steris ( STE) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Steris as such a stock due to the following factors:

  • STE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $34.0 million.
  • STE has traded 3.1 million shares today.
  • STE traded in a range 276.9% of the normal price range with a price range of $3.31.
  • STE traded below its daily resistance level (quality: 76 days, meaning that the stock is crossing a resistance level set by the last 76 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' 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 negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on STE:

STERIS Corporation develops, manufactures, and markets infection prevention, contamination control, microbial reduction, and procedural support products and services for healthcare, pharmaceutical, scientific, research, industrial, and governmental customers worldwide. The stock currently has a dividend yield of 1.3%. STE has a PE ratio of 31. Currently there are 3 analysts that rate Steris a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Steris has been 501,800 shares per day over the past 30 days. Steris has a market cap of $4.1 billion and is part of the health care sector and health services industry. The stock has a beta of 1.18 and a short float of 14.6% with 16.26 days to cover. Shares are up 5.8% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Steris as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, revenue growth, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 31.27% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, STE should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • STERIS CORP has improved earnings per share by 6.2% 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 year. We feel that this trend should continue. During the past fiscal year, STERIS CORP increased its bottom line by earning $2.25 versus $2.17 in the prior year. This year, the market expects an improvement in earnings ($3.25 versus $2.25).
  • STE's revenue growth trails the industry average of 22.7%. Since the same quarter one year prior, revenues slightly increased by 7.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The current debt-to-equity ratio, 0.58, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, STE has a quick ratio of 1.74, which demonstrates the ability of the company to cover short-term liquidity needs.

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