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 Varian Medical Systems ( VAR) 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 Varian Medical Systems as such a stock due to the following factors:

  • VAR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $55.6 million.
  • VAR has traded 90,653 shares today.
  • VAR traded in a range 223.8% of the normal price range with a price range of $2.52.
  • VAR traded below its daily resistance level (quality: 19 days, meaning that the stock is crossing a resistance level set by the last 19 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 VAR:

Varian Medical Systems, Inc. designs, manufactures, sells, and services medical devices and software products for treating cancer and other medical conditions in the United States. The company operates in two segments, Oncology Systems and Imaging Components. VAR has a PE ratio of 22. Currently there are 4 analysts that rate Varian Medical Systems a buy, 1 analyst rates it a sell, and 1 rates it a hold.

The average volume for Varian Medical Systems has been 763,500 shares per day over the past 30 days. Varian Medical Systems has a market cap of $8.9 billion and is part of the health care sector and health services industry. The stock has a beta of 0.21 and a short float of 7.1% with 10.99 days to cover. Shares are up 4.5% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Varian Medical Systems as a buy. 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, reasonable valuation levels, expanding profit margins and growth in earnings per share. We feel its strengths outweigh the fact that the company shows weak operating cash flow.

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 Health Care Equipment & Supplies industry. The net income increased by 14.2% when compared to the same quarter one year prior, going from $92.79 million to $105.97 million.
  • The current debt-to-equity ratio, 0.31, 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 1.29, which illustrates the ability to avoid short-term cash problems.
  • 44.62% is the gross profit margin for VARIAN MEDICAL SYSTEMS INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 13.95% is above that of the industry average.
  • VARIAN MEDICAL SYSTEMS INC has improved earnings per share by 19.3% 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, VARIAN MEDICAL SYSTEMS INC reported lower earnings of $3.83 versus $3.99 in the prior year. This year, the market expects an improvement in earnings ($4.31 versus $3.83).

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