Barbarian At The Gate: Centene (CNC)

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 Centene ( CNC) 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 Centene as such a stock due to the following factors:

  • CNC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $78.0 million.
  • CNC has traded 923,619 shares today.
  • CNC traded in a range 209% of the normal price range with a price range of $2.83.
  • CNC 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 CNC:

Centene Corporation operates as a diversified, multi-national healthcare enterprise that provides programs and services to under-insured and uninsured individuals in the United States. It operates in two segments, Managed Care and Specialty Services. CNC has a PE ratio of 29. Currently there are 7 analysts that rate Centene a buy, no analysts rate it a sell, and 8 rate it a hold.

The average volume for Centene has been 1.2 million shares per day over the past 30 days. Centene has a market cap of $8.6 billion and is part of the health care sector and health services industry. The stock has a beta of 0.18 and a short float of 5.1% with 5.38 days to cover. Shares are up 39.5% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Centene as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, compelling growth in net income, notable return on equity and solid stock price performance. We feel its strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 13.3%. Since the same quarter one year prior, revenues rose by 48.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • CENTENE CORP reported significant earnings per share improvement 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 two years. We feel that this trend should continue. During the past fiscal year, CENTENE CORP increased its bottom line by earning $2.22 versus $1.43 in the prior year. This year, the market expects an improvement in earnings ($2.70 versus $2.22).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Health Care Providers & Services industry. The net income increased by 91.0% when compared to the same quarter one year prior, rising from $32.98 million to $63.00 million.
  • 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. Compared to other companies in the Health Care Providers & Services industry and the overall market, CENTENE CORP's return on equity exceeds that of both the industry average and the S&P 500.
  • Powered by its strong earnings growth of 82.45% and other important driving factors, this stock has surged by 101.52% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp 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 other strengths this company displays justify these higher price levels.

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