Before the S&P 500 and Russell 2000 caught a bid late in today's trading session, I was looking for a Midcap growth stock that had outperformed the broad indices on this recent sell off. It would be even better if I could find a company that fit this description that also popped up on the momentum stock screener I use to uncover potential winners in the market. Plus if I could find a chart that was on the bullish side of things, I figured I could carve something good out of this market malaise.
My screen is relatively simple. I look for stocks that have had a good earnings surprise recently, are within earshot of their 52 week highs, and are Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) stocks. This way I have a solid earnings story with some strength in the stock price. Then I can go one by one and find stocks that I think have better charts than the rest of them.
Using this process, today's Bull of the Day is Envision Healthcare Holdings (NYSE:EVHC). Envision is a Zacks Rank #1 (Strong Buy) in the Medical Services industry that ranks in the top 11% of our Zacks Industry Rank. Envision is one of the leading providers of outsourced emergency department and ambulance services. Rather than relying on organic growth alone, EVHC is aggressive in its acquisition of other ambulance companies and looks for M&A activities that are immediately accretive to their bottom line.
As a result we have seen earnings estimates ratchet up for the current year and next year. Current year consensus has risen from 84 cents to $1.10 per share after seven analysts have revised earnings to the upside. Next year's numbers have been revised up from $1.12 to $1.42 by five analysts. In addition to the revisions, earnings surprises over the last two quarters have all helped boost EVHC to our highest rank.
EVHC is a recent newcomer to the publicly traded market, with its IPO having taken place late summer last year. Even so, there is enough history to give it a quick onceover from a technical perspective. First off, I want you to put the recent price action in proper context. The Russell 2000 has sold off hard the last three trading days. Last Thursday we saw the 1180s. Today we closed close to 50 points below that. There has been a rotation out of the higher beta names on a grand scale. Seeing EVHC, a strong stock that was near 52 week highs, give up some real estate the way that is has only furthered my bullish feelings on the stock.
Now let's look back at the run it has had. Moving from below $25 shortly after the IPO to a 52 week high near $37. Adding 50% to your valuation post IPO should have plenty of investors smiling. Now look at the support levels EVHC has seen since the high. Pulling back to the 38.2% retracement of the run, the stock found support before its last run higher where it got slapped down along with the rest of the market. Right here at $33, sitting just below the 25 day moving average shifted to the right by 5 days, EVHC is a sneeze away from reaffirming an uptrend. I would sit back and wait for an intraday break of $33.57 and go ahead and peck at it. Good news it you can put a stop just shy of $32 and if the market sells off strong again you get away relatively unscathed.
Overall, Envision Healthcare has a strong fundamental story behind it, is active in accretive acquisitions and carries a Zacks Rank #1 (Strong Buy.) The technical picture shows a stock that is catching its breath after a big run and may be poised to strike higher as long as the market holds in there.