Health care stock Evolent Health made its entry onto the IBD 50 this week, flashing a fresh face with a new base and a nearby buy point.
The appearance of new names on the list of growth stocks could signal the beginning of the end of oil stocks' dominance and a nascent shift to more traditional, less capital-intensive growth stocks. And the arrival of this medical software developer on the IBD 50 as the stock market attempts a new rally makes this health care stock an ideal candidate for stock watchlists.
Evolent develops software to help health care providers and payers control costs, financial risks and deliver high-value service.
High Rank For Health Care Stock
Evolent Health ranks No. 1 in its medical software industry group with a Composite Rating of 94, according to Stock Checkup. Stocks with IBD Ratings in the 90s are preferred, with 99 being the highest possible. Evolent's Relative Strength Rating, a technical metric that measures the stock's performance against all other stocks, is also a strong 94.
On top of that, the health care stock's relative strength line is already marching into new high ground, according to MarketSmith chart analysis. That's a sign that deep-pocketed institutional investors like mutual funds have taken a shine to the stock and its prospects. Interest by the pros can also be seen its Accumulation/Distribution Rating of B+.
As with other stocks whose RS lines hit new highs as the stock price nears a buy point, Evolent Health carries a relative strength line Blue Dot, which can be seen on its MarketSmith chart.
The one ratings flaw of this health care stock can be seen in the subpar Earnings Per Share Rating of 76. But that could be rising soon if the company can continue recent progress on its earnings growth. EPS swung from a year-ago loss of 1 cent a share to a profit of 12 cents a share in the first quarter as sales leapt 38% to $297.1 million, according to MarketSmith. Earnings rose 167% in Q4 as sales rose 1%.
Analysts see full-year earnings mushrooming 1,400% to 30 cents a share.
Evolent began trading on the NYSE in 2015. It rang up earnings of 24 cents a share that year, but posted losses the next five years.
Evolent Health Near Buy Point
Evolent stock has formed a cup-with-handle base with a buy point of 33.24. The cup started Oct. 8 when the stock completed a 54% run-up from its previous flat base and peaked at 34.60. The handle started forming on March 30 when the stock started drifting lower from 33.14.
While one week is the shortest handle length allowed in the CAN SLIM stock investing system, Evolent's is a rather long 11 weeks of the base's total 36 weeks. Undesirable aspects of the handle are that it includes a sizable 25% dip and pierced both its 50-day moving average and 200-day moving average. But the health care stock is back above both lines now and within 9% of its buy point. Also, the handle is large enough that it can be considered a cup base on its own.
