The security has found new life since its mid-October lows
Pharmacy benefits provider Express Scripts Holding Company (NASDAQ:ESRX) has found new life since its mid-October bottom, rallying roughly 28% since to close at its highest point since March on Friday. In the process, the shares pushed through the $64 level, which is three times the 2009 low, and have broken out north of a trendline connecting lower highs since mid-2015. On the fundamental front, the company just upped its full-year forecast, and when you consider the vast amount of negativity surrounding ESRX, the case for an extended run higher looks strong.
Short sellers could provide fresh buying power, should they continue covering their positions. For instance, the 5.3% of the equity’s float dedicated to short interest would take close to eight sessions to buy back, based on average daily volumes. This would seem to be ample sideline cash to fuel even more upside.
Plus, analysts have yet to embrace the suddenly outperforming stock. This is evidenced by the fact the majority of brokerage firms tracking Express Scripts have “hold” or “strong sell” ratings in place. A round of upgrades could also keep the wind at ESRX’s back.
Meanwhile, the security’s Schaeffer’s Volatility Index (SVI) of 23% ranks in the low 14th annual percentile, pointing toward unusually low volatility expectations at the moment for ESRX. And our recommended call has a leverage ratio of 6.31, meaning it’ll double in value on a 15.86% increase in the underlying security.
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