Cyberonics (CYBX) Shows 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 Cyberonics ( CYBX) 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 Cyberonics as such a stock due to the following factors:

  • CYBX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $33.3 million.
  • CYBX has traded 637,194 shares today.
  • CYBX traded in a range 234.2% of the normal price range with a price range of $4.05.
  • CYBX traded below its daily resistance level (quality: 5 days, meaning that the stock is crossing a resistance level set by the last 5 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 CYBX:

Cyberonics, Inc., together with its subsidiaries, designs, develops, markets, and sells implantable medical devices to hospitals and ambulatory surgery centers. CYBX has a PE ratio of 28. Currently there are 3 analysts that rate Cyberonics a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Cyberonics has been 358,400 shares per day over the past 30 days. Cyberonics has a market cap of $1.8 billion and is part of the health care sector and health services industry. The stock has a beta of 1.14 and a short float of 7.2% with 3.57 days to cover. Shares are up 24.7% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Cyberonics 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 notable return on equity. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the ratings report include:
  • CYBERONICS INC has improved earnings per share by 21.6% 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, CYBERONICS INC increased its bottom line by earning $2.00 versus $1.65 in the prior year. This year, the market expects an improvement in earnings ($2.38 versus $2.00).
  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Health Care Equipment & Supplies industry average. The net income increased by 19.0% when compared to the same quarter one year prior, going from $13.90 million to $16.54 million.
  • CYBX's revenue growth trails the industry average of 22.6%. Since the same quarter one year prior, revenues slightly increased by 5.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • CYBX has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 7.25, which clearly demonstrates the ability to cover short-term cash needs.
  • 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. When compared to other companies in the Health Care Equipment & Supplies industry and the overall market, CYBERONICS INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.

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