Water-Logged And Getting Wetter Stock Of The Day: Novo Nordisk A/S (NVO)

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 Novo Nordisk A/S ( NVO) 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 Novo Nordisk A/S as such a stock due to the following factors:

  • NVO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $85.3 million.
  • NVO has traded 307,177 shares today.
  • NVO traded in a range 754.8% of the normal price range with a price range of $8.39.
  • NVO traded below its daily resistance level (quality: 95 days, meaning that the stock is crossing a resistance level set by the last 95 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 NVO:

Novo Nordisk A/S, a healthcare company, engages in the discovery, development, manufacture, and marketing of pharmaceutical products worldwide. It operates in two segments, Diabetes Care and Biopharmaceuticals. The stock currently has a dividend yield of 1%. Currently there are 2 analysts that rate Novo Nordisk A/S a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Novo Nordisk A/S has been 1.6 million shares per day over the past 30 days. Novo Nordisk A/S has a market cap of $145.7 billion and is part of the health care sector and drugs industry. Shares are up 35.2% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

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

Highlights from the ratings report include:
  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Pharmaceuticals industry and the overall market, NOVO NORDISK A/S's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for NOVO NORDISK A/S is currently very high, coming in at 84.63%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 39.19% is above that of the industry average.
  • NOVO NORDISK A/S has improved earnings per share by 20.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, NOVO NORDISK A/S reported lower earnings of $1.64 versus $1.73 in the prior year. This year, the market expects an improvement in earnings ($1.87 versus $1.64).
  • NVO's debt-to-equity ratio is very low at 0.02 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that NVO's debt-to-equity ratio is low, the quick ratio, which is currently 0.52, displays a potential problem in covering short-term cash needs.

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