An ascending triangle pattern has formed in the chart of Covetrus Inc. (CVET). If the resistance level is broken, a breakout could occur.
CVET is an animal-health technology and services company dedicated to supporting the companion, equine, and large-animal veterinary markets. The company’s services include supply chain services, software solutions, and prescription management.
The company, which recently finalized its exit from parent company Henry Schein, Inc. (HSIC), beat earnings and revenue last month, with EPS up 52.9% year over year, and revenue up 10.8% to $1.13 billion. CVET’s strategy of focusing on customer engagement has enabled it to drive growth higher than its pre-COVID rates, and scale its operations by significantly investing in pharmacy capacity and innovation.
As of the latest quarter, the company had $355 million in cash, up from $68 million in the same quarter last year. Its long-term debt of $1.1 billion is high, but its current ratio is healthy at 2.1. Sales are expected to grow 4.9% next year and revenue is expected to increase by 12.2% for 2021.
The company is trading at a low valuation, with a Price to Sales ratio of 0.7 and a Price to Book ratio of 2.5. The stock has shown strong medium and long-term momentum, but weak near-term performance.
Take a look at the 1-year chart of CVET below with the added notations:
Chart of CVET provided by TradingView
While climbing a trendline of support (green), CVET has also formed an important level of resistance at $30 (red), thus creating an ascending triangle pattern. The stock just bounced off the trendline again and could make another run at the $30 level. At some point, either that level or the trendline support will break.
A long trade could be entered on a break above $30, with a protective stop placed under the point of entry.
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Christian Tharp, CMT
CVET shares were trading at $27.16 per share on Monday morning, up $0.66 (+2.49%). Year-to-date, CVET has declined N/A%, versus a 16.44% rise in the benchmark S&P 500 index during the same period.
About the Author: Christian Tharp, CMT
Christian is an expert stock market coach at the Adam Mesh Trading Group who has mentored more than 4,000 traders and investors. He is a professional technical analyst that is a certified Chartered Market Technician (CMT), which is a designation awarded by the CMT Association. Christian is also the author of the daily online newsletter Todays Big Stock. More...
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