Hospira (HSP) Is Water-Logged And Getting Wetter Today

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 Hospira ( HSP) 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 Hospira as such a stock due to the following factors:

  • HSP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $68.1 million.
  • HSP has traded 1.3 million shares today.
  • HSP traded in a range 264.3% of the normal price range with a price range of $0.69.
  • HSP traded below its daily resistance level (quality: 27 days, meaning that the stock is crossing a resistance level set by the last 27 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 HSP:

Hospira, Inc. provides injectable drugs and infusion technologies to develop, manufacture, distribute, and market products worldwide. The company operates through Americas, EMEA, and APAC segments. HSP has a PE ratio of 45. Currently there is 1 analyst that rates Hospira a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for Hospira has been 1.3 million shares per day over the past 30 days. Hospira has a market cap of $15.3 billion and is part of the health care sector and drugs industry. The stock has a beta of 1.13 and a short float of 0.9% with 1.85 days to cover. Shares are up 44.6% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Hospira as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, growth in earnings per share, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 2.1%. Since the same quarter one year prior, revenues rose by 11.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The current debt-to-equity ratio, 0.51, 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 1.20, which illustrates the ability to avoid short-term cash problems.
  • HOSPIRA INC has improved earnings per share by 7.5% 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, HOSPIRA INC turned its bottom line around by earning $1.95 versus -$0.05 in the prior year. This year, the market expects an improvement in earnings ($3.02 versus $1.95).
  • The gross profit margin for HOSPIRA INC is rather high; currently it is at 50.30%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, HSP's net profit margin of 6.43% significantly trails the industry average.
  • 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 69.62% over the past year, a rise that has exceeded that of the S&P 500 Index. 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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