Trade-Ideas: Humana (HUM) Is Today's

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 Humana ( HUM) 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 Humana as such a stock due to the following factors:

  • HUM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $186.3 million.
  • HUM has traded 566,871 shares today.
  • HUM traded in a range 282.3% of the normal price range with a price range of $8.04.
  • HUM 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 HUM:

Humana Inc., together with its subsidiaries, operates as a health and well-being company. The company operates through three segments: Retail, Employer Group, and Healthcare Services. The stock currently has a dividend yield of 0.7%. HUM has a PE ratio of 23. Currently there are 8 analysts that rate Humana a buy, 1 analyst rates it a sell, and 8 rate it a hold.

The average volume for Humana has been 1.3 million shares per day over the past 30 days. Humana has a market cap of $26.7 billion and is part of the health care sector and health services industry. The stock has a beta of 1.08 and a short float of 2.7% with 4.31 days to cover. Shares are up 24.2% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Humana as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, increase in net income and reasonable valuation levels. We feel its strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • HUM's revenue growth has slightly outpaced the industry average of 13.3%. Since the same quarter one year prior, revenues rose by 18.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.38, 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 1.22, which illustrates the ability to avoid short-term cash problems.
  • 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 46.03% 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, HUM should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Health Care Providers & Services industry average. The net income increased by 16.8% when compared to the same quarter one year prior, going from $368.00 million to $430.00 million.

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