Express Scripts (ESRX) – Riding the Health Care Wave?

Express Scripts, a provider of pharmacy benefits management including retail management, card programs, home delivery, specialty and formulary management among other services has climbed to new 52 week highs as recently as yesterday. With the passage of a portion of the Obama Administrations Health Care Reform Bill, health care stocks in many sectors have rallied. But Express Scripts also shows great sales and earnings growth at a reasonable price.

The company’s stock has moved from $48.05 a share to a recent 52 week high of  $103.24 a share. More than doubling over the past 12 months. Revenue is growing 93% for this quarter and next quarter compared to the prior year numbers. While earnings is expanding roughly 28% this quarter and 35% next quarter, according to recent estimates. Analysts have bumped their earnings expectations over the past three months from $1.06 a share for first quarter of the year to $1.10 a share.

The price of the stock compared to its earnings (P/E) is 20.64 midway through the trading day today. When considering Express Scripts’ nearest quarters, this is a very reasonably priced stock. The 5 year growth rate is tempered at 19.6% which allows the PEG to be reported at a more standard ratio near 1. I believe the stock will continue to move higher with investors interested in industry due to the recent government action. The company will also report their first quarter earnings the last week of April, which should create additional interest from traders.

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Capella Education Company (CPLA) Continues to Perform

Capella Education through its subsidiary Capella University has performed well over the past year rising from $50.34 a share to a recent 52-week high of $86.06. The provider of post-secondary education recently beat it’s fourth quarter earnings expectations and has seen it’s first quarter expectations increase steadily from 64 cents a share to 78 cents over the quarter.

The company will report its first quarter results on April 27th and could continue to move higher if expectations improve again. Revenue for the quarter as compared to last year is improving 29% according to analysts. With early revenue increasing 26%. The quarterly earnings are even more optimistic than the revenue numbers with an increase for the first quarter being 59% better than the same quarter last year.

An end-of-the-day price to earnings ratio (P/E) of 25.29 is low when compared to the quarterly growth but on par at a PEG ratio of 1.02 when compared to a 5 year estimated growth rate of 24.88%. The recent run has been quite steep so selling part of a trade at this time is a better ideal than adding to a position. Wait for a decline in the price weeks before the earnings to resume purchasing shares.

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Dollar Tree (DLTR) Continues to Peak

The stock for discount variety retailer Dollar Tree Inc. (DLTR) continues to reach new highs with analysts expecting better results when the company announces its earnings on May 24th. The current quarterly earnings estimates for the stock got a bump over the past 30 days from 74 cents a share to 81 cents a share compared to the same quarter last year. While the yearly estimate moved higher in the last week from $4.14 a share to $4.15 a share.

Quarterly Growth

Current quarter growth for the company is expected to come in at 22.7% while next quarter’s growth is pegged a little lower at 17.5%. With a forward price to earnings ratio (P/E) of 12.25, the stock is a little underpriced. The recent positive company expectations for competitor Big Lots (BIG) has also helped the variety discount sector as a whole. Big Lots moved from $28.85 a share to $36.09 a share over the past month on company optimism for the current quarter.

Variety Discounter Trade

Dollar Tree’s recent quarter was decent with a 6% improvement in earnings compared to what was expected. Revenue continues to climb as shoppers search for bargains in a troubled economic environment. DLTR is seeing revenue move higher 9% a quarter and 9% for the year. The discount retailing sector remains strong and should for some time providing a nice stable industry to own several names for the short-term.

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Big Lots (BIG) Rallies on Stronger Expectations

Big Lot Inc, the closeout retailer, has rallied recently on strong expectations for current and future quarter earnings. The company has beat earnings expectations four quarters in a row while earning 27 cents a share at the end of their 3rd quarter compared to expectations of 18 cents. The company is ready to announce their 4th quarter earnings for 2009 on Wednesday with estimates at $1.28 a share. This is a 28% improvement over the same quarter a year ago.

Next quarter is also looking well with analysts recently improving expectations to 53 cents a share from 47 cents a share 3 months ago. The companies forward looking Price/Earnings is at 13.07 after a nice 2.24% rise today. Revenue growth is moving higher each quarter on a year-over-year basis near 5% each period.

Options action for BIG Call options has been strong over the last two weeks. There has been 5 times more Call action for Big stock options compare to interest in Put options. The March 35 Calls are particularly popular which is slightly above the current trading price of $34.24 a share. You could purchase the stock going into earnings and place a trailing stop in case the earnings aren’t as strong as expected. Waiting until after the earnings would be a safe trade if the company increases their expectations for future quarters.

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