Water-Logged And Getting Wetter: Express Scripts (ESRX)

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 Express Scripts ( ESRX) 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 Express Scripts as such a stock due to the following factors:

  • ESRX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $427.6 million.
  • ESRX has traded 3.5 million shares today.
  • ESRX traded in a range 213.4% of the normal price range with a price range of $2.96.
  • ESRX traded below its daily resistance level (quality: 14 days, meaning that the stock is crossing a resistance level set by the last 14 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 ESRX:

Express Scripts Holding Company operates as a pharmacy benefit management (PBM) company in the United States and Canada. The company operates through two segments, PBM and Other Business Operations. ESRX has a PE ratio of 32. Currently there are 13 analysts that rate Express Scripts a buy, no analysts rate it a sell, and 7 rate it a hold.

The average volume for Express Scripts has been 3.9 million shares per day over the past 30 days. Express Scripts has a market cap of $65.4 billion and is part of the health care sector and health services industry. The stock has a beta of 0.80 and a short float of 2.7% with 15.09 days to cover. Shares are up 5.4% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Express Scripts as a buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures 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:
  • EXPRESS SCRIPTS HOLDING CO has improved earnings per share by 42.9% 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, EXPRESS SCRIPTS HOLDING CO increased its bottom line by earning $2.66 versus $2.31 in the prior year. This year, the market expects an improvement in earnings ($5.45 versus $2.66).
  • 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 34.4% when compared to the same quarter one year prior, rising from $328.30 million to $441.10 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 13.3%. Since the same quarter one year prior, revenues slightly increased by 5.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.60, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.45 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • Powered by its strong earnings growth of 42.85% and other important driving factors, this stock has surged by 29.15% over the past year, outperforming the rise in the S&P 500 Index during the same period. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.

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