CVS – Health Care Stock To Watch: The IBD 50 Leader In This Nascent Market Is Near Buy Point
The IBD 50 Stock To Watch for Wednesday is Progyny (PGNY), a health care stock that is up 42% year to date, despite spending 20 weeks in consolidations.
The most recent consolidation has become a 23-week-old cup base. The stock has charged ahead in 16 of the past 19 sessions, rising almost 42%, and is fast approaching a possible buy point.
There are health care stocks that provide any number of ways to invest in illnesses or injuries, or even in death. But the stock market provides little opportunity to invest in pregnancy, fertility and family planning.
However, with the majority of Americans now less than 40 years old, those issues are becoming a much larger cultural issue. And pandemic shifts are urging changes in the way younger Americans think about how they balance work and family priorities.
At the same time, that rising demographic is more open to technologies, counseling and other forms of pregnancy support. In addition, U.S. businesses are starting to think more creatively and aggressively about their employee benefits, both in terms of cutting costs and in offering a more progressive array of options in order to help retain talent.
Then intersection of all those factors is the market in which Progeny operates. Potential rivals include massive health insurers, like UnitedHealth Group (UNH), Cigna (CI) and CVS Health‘s (CVS) Aetna unit. However, Progyny has a first-mover’s advantage.
The New York-based company runs a network involving around 900 fertility specialists at more than 650 clinics in the U.S. The outfit reported 184 client companies at the end of June, up from 134 a year ago. Its average number of members over that period rose 33%, to 2.795 million.
A Health Care Stock
The stock fell in February, after management projected at least $520 million in sales this year. That would be a 51% jump, but investors expected more.
Two quarters into the year, the company is running well ahead of its own guidance. Sales in the first half rose 72% vs. year-ago levels. Earnings growth is running way above that pace.
Analysts project a 182% earnings gain this year, followed by a 25% increase for 2022. However, projections call for earnings to be flat in the September quarter, with a 27% rise in revenue.
A look at Progyny’s chart shows its current base is 36% deep. It’s a little deeper than the 30% to 33% maximum prescribed by CAN SLIM. But sometimes deep bases work, this is particularly true when the company’s fundamentals and other traits are outstanding.
In that regard, Progeny ranks a 92 Composite Rating from IBD, placing it as the top-ranked stock in the managed care industry group. The company shows no debt. It reported cash, equivalents and marketable securities at the end of Q2 of $93.97 million, down from $109.3 million at the end of 2020.
The health care stock has a Relative Strength Rating of 88, a solid number, but depressed somewhat by the length of Progyny’s base. Its relative strength line is tracking the stock’s steep climb off an August low, although it’s considerably below its highs from June.
Four days of sideways trading almost left the stock with a handle and a lowered buy point. The handle stopped one day short of the five days needed for a valid handle. Aggressive investors could potentially chart an alternative, early buy point at 59.68.
That entry would carry slightly more risk than the standard 66.71 entry, about 10% above where the stock currently trades.
Please follow Alan R. Elliott on Twitter @IBD_Aelliott
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