Strong On High Volume: WellCare Health Plans (WCG)

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 WellCare Health Plans ( WCG) as a strong on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified WellCare Health Plans as such a stock due to the following factors:

  • WCG has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $30.9 million.
  • WCG has traded 121,042 shares today.
  • WCG is trading at 3.92 times the normal volume for the stock at this time of day.
  • WCG is trading at a new high 3.09% above yesterday's close.

'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on WCG:

WellCare Health Plans, Inc. provides managed care services for government-sponsored health care programs. It operates in three segments: Medicaid Health Plans, Medicare Health Plans, and Medicare PDPs. WCG has a PE ratio of 103. Currently there are 3 analysts that rate WellCare Health Plans a buy, 2 analysts rate it a sell, and 7 rate it a hold.

The average volume for WellCare Health Plans has been 368,400 shares per day over the past 30 days. WellCare Health Plans has a market cap of $3.8 billion and is part of the health care sector and health services industry. The stock has a beta of 1.49 and a short float of 5.9% with 6.78 days to cover. Shares are up 6% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates WellCare Health Plans as a hold. 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 and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:
  • WCG's revenue growth has slightly outpaced the industry average of 13.1%. Since the same quarter one year prior, revenues rose by 16.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The current debt-to-equity ratio, 0.56, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, WCG has a quick ratio of 1.63, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Health Care Providers & Services industry. The net income has significantly decreased by 60.3% when compared to the same quarter one year ago, falling from $44.10 million to $17.50 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Health Care Providers & Services industry and the overall market, WELLCARE HEALTH PLANS INC's return on equity significantly trails that of both the industry average and the S&P 500.

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