Medicines Company (MDCO) Marked As A Barbarian At The Gate

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 Medicines Company ( MDCO) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Medicines Company as such a stock due to the following factors:

  • MDCO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $27.4 million.
  • MDCO has traded 654,295 shares today.
  • MDCO traded in a range 325.1% of the normal price range with a price range of $2.67.
  • MDCO traded above its daily resistance level (quality: 498 days, meaning that the stock is crossing a resistance level set by the last 498 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' 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 positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on MDCO:

The Medicines Company provides medicines for patients in acute and intensive care hospitals worldwide. Currently there are 2 analysts that rate Medicines Company a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Medicines Company has been 1.0 million shares per day over the past 30 days. Medicines has a market cap of $2.0 billion and is part of the health care sector and drugs industry. The stock has a beta of 1.66 and a short float of 19.5% with 12.24 days to cover. Shares are up 8.1% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Medicines Company as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Pharmaceuticals industry. The net income increased by 200.8% when compared to the same quarter one year prior, rising from -$5.00 million to $5.03 million.
  • 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, MDCO has a quick ratio of 2.01, which demonstrates the ability of the company to cover short-term liquidity needs.
  • After a year of stock price fluctuations, the net result is that MDCO's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
  • Net operating cash flow has significantly decreased to -$41.03 million or 706.22% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Pharmaceuticals industry and the overall market, MEDICINES CO's return on equity significantly trails that of both the industry average and the S&P 500.

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