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Get a free trial at www.tradespoon.com. Tradespoon’s (http://www.tradespoon.com/) stock-pick system monitors a universe of 1,000 U.S. stocks, combining both technical and fundamental stock analysis. Based on our proprietary algorithms, Tradespoon tracks each stock using such variables as... More
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  • View: Start Buying CVS Caremark (NYSE: CVS)

    Highlights:

    CVS is much more tied into healthcare rather than general retail than its major competitors. This makes it more dependent on reimbursement policies of insurers, whether governmental (i.e. Medicare and Medicaid) and private insurers.

    The stock closed yesterday's trading session at $59.51. In the past year, the stock has hit a 52-week low of $43.30 and 52-week high of $60.66. Technical indicators for the stock are bullish. CVS has a market cap of $72.78 billion and is part of the services sector.

    GROWTH AND BALANCE SHEET

    CVS Caremark Corp. first-quarter net income jumped 23 percent. It earned $956 million, or 77 cents per share, compared with $776 million, or 59 cents per share, last year. Revenue fell slightly to $30.76 billion. Adjusted earnings totaled 83 cents per share. Generic drugs lifted profitability at CVS's retail business, where gross profit was 30.9 percent of sales, up 2.4 points. Revenue in the retail division rose 0.2 percent to $10.05 billion, while same-store sales of general merchandise items were up 1.2 percent.

    CVS narrowed its forecast for 2013 earnings to a range of $3.89 to $4 per share. That compares to its forecast earlier this year for earnings of $3.86 to $4 per share. Analysts expect, on average, earnings of $3.96 per share.

    VALUATION

    CVS runs the second-largest drugstore chain with 7,400 locations and one of the nation's largest PBMs. It has benefited from the trend so much so that generic drugs now make up more than 81 percent of the prescriptions filled at its retail pharmacies, up from 78.1 percent in last year's first quarter.

    CVS PE stands at 18.51 above the industry average of 11.53 and above the S&P 500 average of 16.70. The stock is currently trading 1% above its intrinsic value of $58.64 this suggests that the stock is overvalued at these levels. CVS's current Price/Sales of 0.59 is above the average of its industry of 0.40. The beta of 1.02 implies higher volatility of the stock with respect to the S&P 500. CVS's Total Debt/Equity is 25.20 and is not acceptable for our model. CVS pays out an annual dividend of $0.90, or 1.30%.

    RECOMMENDATION for next 6 months: We initiate our coverage with START BUY. The company has demonstrated bullish technical signs and executes well in every segment, international expansion will be the growth area for years to come. CVS has gained 22.94 year-to-date. Our overall score for CVS is 5.67.

    May 22 11:35 AM | Link | Comment!
  • 5 Tips For Trading During Earnings Season

    Earnings are the fundamental event in a company's quarter. After all, whether trading in the short term or investing over the long term, buying stock is buying ownership in the company - something that is implied but can be overlooked. At Tradespoon, a stock-picking service fueled by one of the most sophisticated statistical systems in the industry, earnings reports are one of the top fundamental indicators that we use to determine the timing and direction of recommended trades.

    During earnings season - particularly this one with markets at or near record highs - investors and traders may be worried about getting into the market. Here are three reminders that should allay their fears:

    • All the normal rules of trading apply. Traders should apply all of the usual rigor that accompanies their trading and investing criteria. Speculating on whether a company will "hit" or "miss" a number is gambling. Traders should always use stops and limits to predefine risk and reward ratios. And, traders should make sure they are comfortable with a reasonable degree of earnings outcomes - and not get spooked if the company slightly misses expectations.
    • Options strategies shine during earnings. One risk for earnings is that prices gap between trading sessions, which impacts an entire equity position and could bypass stops. If the trader buys options or option spreads, the trades not only require less capital but also have pre-defined costs. The most that these trades could lose is the initial investment, while the upside may or may not be capped.
    • More to it than "hitting" or "missing" expectations. Earnings reports are complex disclosures that are more than the initial headlines. Traders and investors should conduct their due diligence - read the reports and conference call transcripts - on any company they hold positions in and figure out if they need to adjust their position accordingly.
    • Forget about companies with inconsistent earnings. There are multiple ways to "value" a company - revenues, earnings, cash flow, etc. But, one of the most important factors in a company's value is consistent earnings growth and performance relative to expectations. Without that, it is best to move along to another trade.
    • Right before earnings might not best the best day to initiate positions. On earnings day, there are more than usual amount of variables that factor into a decision to enter a trade. And, with large traders exiting, hedging or otherwise adjusting positions, the risk/reward of entering a trade is unlikely to be favorable. It is just smarter to stay away.

    Trading doesn't need to stop because it's earnings season. In fact, earnings season can provide some of the best opportunities to enter positions - as earnings data and market reactions provide key inputs behind the decision to enter a trade.

    Tags: earnings, trading
    Apr 15 3:28 PM | Link | Comment!
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