Express Scripts Holding Company (ESRX) — This is the largest pharmacy benefits management company in the United States, offering prescription benefits and disease management services.
The company’s improving financial performance and high cash flow, as well as rumors of a possible takeover by Walgreens Boots Alliance Inc (WBA), make this performer an interesting speculation in a highly volatile stock market.
Capital IQ has a “buy” rating on ESRX stock. In July, its analysts raised their 12-month price target by $4 to $114. They also increased their 2015 earnings per share (EPS) estimate by 7 cents to $5.52 per share, excluding items, up 13% from 2014. And the 2016 projection was upped by 7 cents to $6.07. These upward revisions were due mostly to the company’s debt-funded accelerated share repurchase plan. In the second quarter, it resulted in an 11% decline in shares outstanding.
In a highly volatile stock market we should look for quality companies that fall due to irrational selling and offer an excellent opportunity for either a trade or long-term investment. Express Scripts has demonstrated it is a well-managed company with strong earnings, and its stock meets our volatility standard.
On Monday, ESRX stock fell as much as 20% to a low of $68.06 before rallying to finish down only 3.5% at $81.93. Shares opened at $79.50, creating a down gap between Friday’s low at $84.57 and Monday’s high of $83.51.
Prior to the breakdown, ESRX stock had traded in a well-defined bull channel with support at about $88. High volume and a deeply oversold MACD indicator could indicate the stock has executed a selling climax.
My buy under price is $75 with a two-month trading target of $90, which would result in a gain of 20%. ESRX stock is also qualified for long-term investment as a large-cap growth stock with a high potential return.
