11-13-2009: Warner Chilcott PLC (WCRX): Drug Market with Five Different Tax Jurisdictions

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Warner Chilcott PLC

Warner Chilcott is an Irish pharmaceuticals manufacturer which specializes in dermatology and women's healthcare including birth control products. The latter is not out-of-synch with the Catholic Church in Southern Ireland because the company's facilities are based in Protestant Northern Ireland. The company operates in five different tax jurisdictions. Recently it applied for "redomestication" of its company to Ireland. "PLC" stands for "public limited company" which is a type of limited company whose shares may be sold to the public in the UK, Ireland, or the Philippines. Yet the company has a headquarters of sorts in New Jersey. Under this arrangement, which frankly is somewhat confusing to us, it must and does meet SEC reporting requirements, which is good as far as we're concerned.

The company was brought to our attention by Market Grader which likes it. Unfortunately, this view is not shared by many other popular rating organizations. It is in an industry group which is currently weak and has lots of competition.

In 2000, Galen Holdings PLC qcquired Warner Chilcott and made it a wholly-owned subsidiary. Then in 2004, Galen changed its name to Warner Chilcott. In that year, the company was pursued by at least three major bidders attempting to take it over. This takeover appeared threatened by a large amount of "goodwill" intangibles carried on Warner Chilcott's balance sheet. But it did in fact receive a $3 billion bid from J.P. Moran-Chase and Credit Suisse First Boston.

In 2006, Warner Chilcott filed an initial public offering which did not go very well. Since then, the company has been entangled in a number of patent, licensing, and other legal disputes as well as some problems with some of its drugs resulting in claims there.

The company itself drastically changed character when it acquired Proctor and Gamble's prescription drug business for $3.1 billion. Its prospects for growth were increased by this.

Institutions have been unloading the stock in significant quantities, but insiders have been buying and analysts like the stock very much. The company appears to have very good corporate governance and executives are modestly compensated. We did not notice poison pill tactics inteferring with the company's takeover or acts which would not favor shareholder interests. The company looks like a winner to us, and worth considering both as a trading and as a buy and hold vehicle.

Our biggest concern is our lack of familiarity with many of its products.



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Warner Chilcott plc              (WCRX )    Sector: Healthcare
Unit 19 Ardee Business Park      Industry: Drug Manufacturers - Other
Hale Street                      Exchange: Nasdaq
Rockaway, NJ

Warner Chilcott Limited, a specialty pharmaceutical company, engages
in the development, manufacture, marketing, and sale of branded
prescription pharmaceutical products in women-Ęs healthcare and
dermatology segments primarily in the United States. The company
offers various women healthcare products, including LOESTRIN 24 FE
and FEMCON FE as oral contraceptives; FEMHRT 1/5 and .5/2.5 for oral
treatment of moderate to severe vasomotor symptoms and urogenital
symptoms associated with menopause; and ESTRACE cream to treat
vaginal and vulvar atrophy. It also offers various dermatology
products, such as TACLONEX and DOVONEX for the topical treatment of
psoriasis; and DORYX, an oral adjunctive therapy for severe acne. In
addition, its products under development include WC3016 and WC3026,
the Phase III clinical trial completed products for low-dose oral
contraceptive; WC2055, a Phase II clinical trials completed product
for the treatment of acne; WC3018, a Phase II clinical trials
product for the treatment of acne and other inflammatory skin
conditions; LEO 80-185 for psoriasis of the scalp; and LEO 80-190, a
Phase III clinical trial product for the treatment of psoriasis.
Further, the company-Ęs products under development comprise TD1414, a
Phase II clinical trial product for skin infections; WC3027 for the
treatment of inflammatory skin conditions; WC3035 for the treatment
of acne and rosacea; and WC3036 and WC3043 for the treatment of
erectile dysfunction. Warner Chilcott-Ęs principal customers include
wholesale pharmaceutical distributors, and retail drug and grocery
store chains. It has license and supply agreement with LEO Pharma
A/S. The company was founded in 1968 and is headquartered in
Rockaway, New Jersey.

Last Trade:  22.92                     52-Week Range:  24.45 -   9.24
Trade Date:  11-12                     Avg. Volume:  1,868,510 Shares
Index Membership: Nasdaq 100                       Employees:   1,115

Corporate Governance:

     EPS:   0.10     Dividend Amount: $  0.00       Yield:         0.00%
                    Ex-Dividend Date: N/A         Mkt Cap: $  5,760,000K
                        Payout Ratio:  0.00%

     Last Split Factor (new for old): N/A      Split Date: N/A

Key Statistics:

Enterprise Value: $  6,400,000K           Revenue (ttm)  : $    971,230K
                                             Gross Profit: $    739,340K
Earnings before Income Tax, Depreciation and Amortization: $    536,010K

Enterprise Value/Revenue (ttm):  6.59           Revenue per Share: $    3.88
Enterprise Value/EBITDA (ttm):  11.95       Qtrly Rev Growth (y to y):  7.10%


P/E Ratio (fwd projected):  7.28      P/E Ratio (current): 241.26

P/E Growth Ratio (5 yr expected):  0.92  Operating Margin:   30.09%
               Price/Sales Ratio:  6.00     Profit Margin:    2.45%
                Price/Book Value:  3.97        Book Value: $  5.83/sh.

Return on Assets:   6.71%        Net Income Avl to Common: $    23,780K
Return on Equity:   1.65%          Diluted Earnings/Share:     $  0.10
                              Qrtly Earnings Growth (yoy):       66.90%


Balance Sheet Items :                   Cash Flow Items (ttm):
(most recent qrtr)                      (trailing 12 mo.)

       Total Cash: $    138,190K        Operating Cash Flow:$    423,020K
       Total Debt: $    859,830K        Lvgd Free Cash Flow:$    324,920K
Total Debt/Equity:         0.00
 Total Cash/Share:      $  0.55
    Current Ratio:         1.96

Share Statistics:                       Stock Price History:

    Shares Outstanding:  251,320K       Stk 52-Week Change:  69.28%
                 Float:  128,470K       S&P 500 52-Wk Chng:  19.31%
  Sh. Short % of Float:     3.20%        50-Day Moving Avg:  22.41
           Short Ratio:     4.00        200-Day Moving Avg:  16.77
% Held by Institutions:    93.00%                     Beta:   0.91
    % Held by Insiders:     2.83%

Analysts' Estimates:               Cur. Qtr   Next Qtr  Cur. Year  Next Year
___________________________          Sep-09     Dec-09     Dec-09     Dec-10

  Average Earnings Estimate           0.41       0.69       1.93       3.15
  Average Revenue  Estimate           255M       411M     1,130M     2,980M

Factors Comparing This Company to Its Industry Leader (1.0 = Average):

Long Term EPS Growth Rate (5 yr): 0.000          EPS Growth (Qrtly YoY): 0.634
  PEG Ratio (ttm, 5 yr expected): 0.030                 P/E Ratio (ttm): 0.000
      Revenue Growth (Qrtly YoY): 0.043


Annual Income Statements:                          All numbers in thousands)
  Period Ending                          31-Dec-08    31-Dec-07    31-Dec-06

  Total Revenue                            938,125      899,561      754,457
  Cost of Revenue                          198,785      185,990      151,750
  Gross Profit                             739,340      713,571      602,707

Operating Expenses:
  Research & Development                    49,956       54,510       26,818
  Selling, General & Administrative        192,650      265,822      253,937
  Non-Recurring Expenses                   163,316            0            0
  Other Operating Expenses                 223,913      228,330      253,425
  Total Operating Expenses                 629,835            0            0
  Operating Income or Loss                 109,505      164,909       68,527

Income from Continuing Operations:
  Total Other Income/Expenses Net            1,293        4,806      -21,509
  Earnings Before Interest & Taxes         110,798      169,715       47,018
  Interest Expense                          94,409      122,424      211,675
  Income Before Taxes                       16,389       47,291     -164,657
  Income Tax Expense                        24,746       18,416      -11,147
  Minority Interest                              0            0            0
  Net Income from Continuing Op.s           -8,357       28,875     -153,510

Non-recurring Events:
  Discontinued Operations                        0            0            0
  Extraordinary Items                            0            0            0
  Effect of Accounting Changes                   0            0            0
  Other Items                                    0            0            0
  Net Income                                -8,357       28,875     -153,510

  Preferred Stock & Other Adjustmnts            0            0      -65,112
  Net Income Avail To Common Shares         -8,357       28,875     -218,622


Quarterly Income Statements:                           All numbers in thousands)
  Period Ending                    30-Jun-09   31-Mar-09   31-Dec-08   30-Sep-08

  Total Revenue                      250,816     245,989     242,487     231,939
  Cost of Revenue                     46,962      48,750      53,193      46,810
  Gross Profit                       203,854     197,239     189,294     185,129

Operating Expenses:
  Research & Development              11,945      23,872      15,233       9,997
  Selling, General & Adminis.         53,022      46,766      44,401      45,925
  Non-Recurring Expenses                   0           0     163,316           0
  Other Operating Expenses            56,992      56,993      59,083      59,080
  Total Operating Expenses                 0           0     282,033           0
  Operating Income or Loss            81,895      69,608     -92,739      70,127

Income from Continuing Operations:
  Total Other Income/Expenses Net         14          65         181         317
  Earnings Before Int. & Taxes        81,909      69,673     -92,558      70,444
  Interest Expense                    15,215      18,082      21,066      23,939
  Income Before Taxes                 66,694      51,591    -113,624      46,505
  Income Tax Expense                  10,671       8,255       2,048       6,416
  Minority Interest                        0           0           0           0
  Net Income from Continuing Op.s     56,023      43,336    -115,672      40,089

Non-recurring Events:
  Discontinued Operations                  0           0           0           0
  Extraordinary Items                      0           0           0           0
  Effect of Accounting Changes             0           0           0           0
  Other Items                              0           0           0           0
  Net Income                          56,023      43,336    -115,672      40,089

  Preferred Stock & Other Adj.s            0           0           0           0
  Net Income Avail To Common Shs      56,023      43,336    -115,672      40,089


Annual Balance Sheets:                                All Numbers in Thousands
  Period Ending                        31-Dec-08      31-Dec-07      31-Dec-06
Current Assets:
  Cash & Cash Equivalents                 35,906         30,776         84,464
  Short Term Investments                       0              0              0
  Net Receivables                        143,334        105,304        106,065
  Inventory                               57,776         54,031         66,376
  Other Current Assets                    15,528         26,205         38,900
  Total Current Assets                   252,544        216,316        295,805

  Long-Term Investments                        0              0              0
  Property, Plant & Equipt                60,908         57,453         46,035
  Goodwill                             1,250,324      1,250,324      1,241,452
  Intangible Assets                      993,798      1,329,427      1,533,757
  Accumulated Amortization                     0              0              0
  Other Assets                            21,351         31,454         45,496
  Deferred Long Term Asset Charges             0              0              0
  Total Assets                         2,578,925      2,884,974      3,162,545

Current Liabilities:
  Accounts Payable                       162,801        113,539        159,195
  Short/Current Long Term Debt             5,977          8,284         11,790
  Other Current Liabilities                    0        100,706              0
  Total Current Liabilities              168,778        222,529        170,985

  Long Term Debt                         956,580      1,191,955      1,538,960
  Other Liabilities                       16,780         27,781         10,951
  Deferred LT Liability Charges           86,867         88,289        113,417
  Minority Interest                            0              0              0
  Negative Goodwill                            0              0              0
  Total Liabilities                    1,229,005      1,530,554      1,834,313

Stockholder Equity:
  Misc. Stocks Options Warrants                0              0              0
  Redeemable Perferred Stock                   0              0              0
  Preferred Stock                              0              0              0
  Common Stock                             2,508          2,506          2,506
  Retained Earnings                     -689,836       -681,479       -710,156
  Treasury Stock                          -6,352         -6,330         -6,330
  Capital Surplus                      2,055,521      2,047,164      2,040,877
  Other Stockholder Equity               -11,921         -7,441          1,335
  Total Stockholder Equity             1,349,920      1,354,420      1,328,232
  Net Tangible Assets                   -894,202     -1,225,331     -1,446,977


Quarterly Balance Sheets:                               All Numbers in Thousands
  Period Ending                 30-Jun-09    31-Mar-09    31-Dec-08    30-Sep-08
Current Assets:
  Cash & Cash Equivalents        138,190       30,308       35,906       13,233
  Short Term Investments                0            0            0            0
  Net Receivables                  98,428       82,793      143,334       84,368
  Inventory                        61,728       61,478       57,776       52,846
  Other Current Assets             86,498       76,994       15,528       60,287
  Total Current Assets            384,844      251,573      252,544      210,734

  Long-Term Investments                 0            0            0            0
  Property, Plant & Equipt        77,725       63,357       60,908       58,040
  Goodwill                      1,250,324    1,250,324    1,250,324    1,250,324
  Intangible Assets               885,613      939,705      993,798    1,213,297
  Accumulated Amortization              0            0            0            0
  Other Assets                     17,603       18,797       21,351       23,763
  Deferred LT Asset Charges       132,649            0            0      106,841
  Total Assets                  2,616,109    2,523,756    2,578,925    2,756,158

Current Liabilities:
  Accounts Payable                 58,906      164,191      162,801       36,918
  Current Portion LT Debt           4,935        4,935        5,977        6,609
  Other Current Liabilities             0            0            0            0
  Total Current Liabilities       196,490      169,126      168,778      150,368

  Long Term Debt                  854,895      856,128      956,580    1,027,600
  Other Liabilities               103,830      100,842       16,780      108,720
  Deferred LT Liab. Charges             0            0       86,867            0
  Minority Interest                     0            0            0            0
  Negative Goodwill                     0            0            0            0
  Total Liabilities             1,155,215    1,126,096    1,229,005    1,286,688

Stockholder Equity:
  Misc. Options, WarrantS               0            0            0            0
  Redeemable Perferred Stock            0            0            0            0
  Preferred Stock                       0            0            0            0
  Common Stock                      2,513        2,508        2,508        2,508
  Retained Earnings              -590,477     -646,500     -689,836     -574,164
  Treasury Stock                   -6,352       -6,352       -6,352       -6,352
  Capital Surplus               2,061,478    2,058,153    2,055,521    2,053,714
  Other Stockholder Equity         -6,268      -10,149      -11,921       -6,236
  Total Stockholder Equity      1,460,894    1,397,660    1,349,920    1,469,470
  Net Tangible Assets            -675,043     -792,369     -894,202     -994,151


Annual Cash Flow:                                    All Numbers in Thousands
  Period Ending                       31-Dec-08      31-Dec-07      31-Dec-06

  Net Income                             -8,357         43,336       -153,510
Operating Activites:
  Depreciation                          244,668        252,393        316,946
  Adjustments to Net Income             169,666        -22,591          1,821
  Changes in Accounts Recv'bls          -11,702          1,852        -22,914
  Changes in Liabilities                -62,518         66,676         15,370
  Changes in Inventories                -18,475         12,345        -34,978
  Changes in Other Op'ing Actv's              0              0              0
  Total Cash Flow fr Operations         313,282        339,550        122,735

Investing Activities:
  Capital Expenditures                  -20,314        -18,798        -15,420
  Investments                                 0              0              0
  Other Cash Flows fr Investing         -51,600        -24,000       -267,336
  Total Cash Flows fr Investing         -71,914        -42,798       -282,756

Financing Acitivies:
  Dividends Paid                              0              0              0
  Sale or Purchase of Stock                 -22              0        672,188
  Net Borrowings                       -236,569       -350,511       -438,750
  Other Cash Flows fr Financing             353             71           -455
  Total Cash Flows fr Financing        -236,238       -350,440        232,983

  Effect of Exchange Rate Change              0              0              0
  Change in Cash & Cash Equiv.s           5,130        -53,688         72,962


Quarterly Cash Flow:                                   All Numbers in Thousands
  Period Ending                   30-Jun-09   31-Mar-09   31-Dec-08   30-Sep-08

  Net Income                         56,023      43,336    -115,672      40,089

Operating Activites:
  Depreciation                       61,597      62,585      63,869      64,765
  Adjustments to Net Income           3,330       2,632     163,546       2,115
  Changes in Accounts Recv'bls      -19,913       3,882      -4,209      -3,182
  Changes in Liabilities             24,954      -1,517      15,234     -21,180
  Changes in Inventories               -250      -3,702     -19,660       7,433
  Changes in Other Oper'g Acts       -1,226      -1,857           0           0
  Total Cash Flow f Operations      124,515     105,359     103,108      90,040

Investing Activities:
  Capital Expenditures              -12,485      -6,548      -6,986      -3,315
  Investments                             0           0           0           0
  Other Cash Flows fr Investing      -2,900      -2,900      -2,900      -2,900
  Total Cash Flows fr Investing     -15,385      -9,448      -9,886      -6,215

Financing Acitivies:
  Dividends Paid                          0           0           0           0
  Sale or Purchase of Stock               0           0         -22           0
  Net Borrowings                     -1,233    -101,494     -70,539     -91,888
  Other Cash Flows fr Financing         -15         -15          12          86
  Total Cash Flows fr Financing           0           0           0           0

  Effect of Exchange Rate Chg             0           0           0           0
  Change in Cash & Cash Equiv.      107,882      -5,598      22,673      -7,977


WCRX   Warner Chilcott plc                [Indices near +3.0 or near zero,
                                          or < zero bear special attention.]
P/E Ratio Tests:
Current P/E Ratio < 28?    0.1161       P/E Ratio > 5?             1.0000
P/E Ratio Vs Growth Rate:  0.7600       Forward P/E Ratio < 28?    3.0000

Sales Tests:
Price/Sales Ratio < 2.3?   0.3833       Inventory/Sales < 5%?      0.8119
Sales < $1 billion?        1.0660       Operating Margin < 7.5%?   0.2493

Balance Sheet Tests:
Debt/Equity < 0.40?        1.0000       Long-Term Debt Service:    1.4112
LTD Being Reduced?         3.0000       Short-Term Debt Service:   3.0000
Current Ratio > 2?         0.9795       Working Capital >= 1.5?    1.0211
Leverage Ratio < 20%?      0.6090       Debt / Assets < 1?         2.6960
Quick Ratio > 1?           1.2042       Inventory Turnover > 1?    0.5061
Shares Out Decreasing?     1.8000       Market Cap.> 1.5 Billion?  0.2604
                                        Profit Margin > 7.5%?      0.3267
Income Tests:
Dividend Yield > 2.0%?     0.0000       EPS Annual Growth > 10%?   0.0000
Enterprise Value/Revenue:  3.0000       EPS 5-yr Growth > 20%?     0.0000
Enterprise Value/EBITDA:   1.7067       EPS Growth Consistent?     1.8000
EPS Qrtly Growth > 10%?    3.0000       Collection < 45 days?      0.8069
Rev. Qtrly Growth > 15%?   1.0650       Gross Pft/Cur. LTD < 1?    3.0000
EPS Annual Growth > 10%?   0.0000       Borrowing Int. Rate< 6%?   0.9915

Stock Performance Tests:
Volatility > 25%?          3.0000       % Held by Insiders  < 5%?  1.7668
Beta > 1.25?               0.7280       % Held by Institut. < 50?  0.5376
50 Da MA > 200 Da MA?      0.7382       % Held by Institut. > 30?  3.0000
52-Wk Change vs. S&P 500:  1.2874       Short Ratio > 5?           0.8000
Price/Book Value < 3?      0.0300       Short % of Float > 20?     0.1600
Return on Assets > 17%?    0.3947       Average Volume > 100,000?  3.0000

Cash Flow Tests:
Oper. C.F. > Lever'd C.F:  1.3019       Positive Free Cash Flow?   1.0000
Positive Oper. Cash Flow?  1.0000       Price to C.F./sh. Ratio:   1.2662
                                        Cash Flow / Assets >.10?   1.2420

WCRX    Warner Chilcott plc             Overall Zenith Index:      1.2624


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Channeling Potential

 
The summary below includes a value for `Degree,' which refers on a
scale of 1 to 10 the range of a channel in the period under consi-
deration compared to the total range of price movement. It also looks
for the last closing price to be within the channel, otherwise zeroed.
The `Index' is the `Degree' weighted for volatility.  Generally, the
the higher the index, the more suitable is the stock for trading as
a `rolling stock' between channel high and low points.

Results for Warner Chilcott:
Symbol? WCRX
Total Months Available:  38
       Months in Cycle?   4

Months Covered by Periods:  12

Period 1           Period 2          Period 3
   H1      L1        H2      L2        H3      L3
  15.07    9.24     13.64    9.33     24.45   12.73

RANGE   =  24.45  TO    9.24            Close =  22.18
CHANNEL =  13.64  TO   12.73           Degree =   1
Volatility =   4.10%                    Index =   0
Channel Chart


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20 Days:

1 Day:

The following table details which MACD signals on the preceding chart are best taken.
Originally, this was set up for a two-day span, but ten days gives a better sample.
Unfortunately, with the 10-day span, the colored lines on the histogram are much
harder to read.  Both spans are shown above.  Red turning into green on the histogram
is a buy and green turning into red is a sell, but with the following conditions.  The
share price must have moved at least 0.2% away from the previous signal price in order
to avoid whipsawing.  More importantly, the +/- magnitude of the MACD (the blue line,
which crosses the red line at signal time) must be greater than the minimum required
magnitude indicated below.  Otherwise, the signal is ignored.

WCRX   Minimum Magnitude MACD for Action = ± 0.0650

Ticker Day   Time     Hist.      MACD  Sig Line  Act    Price   Profit

WCRX   30   07:13   -0.0054    0.0810    0.0864   S     22.63     0.00
WCRX   30   10:04    0.0007   -0.0655   -0.0662   B     22.25     1.67
WCRX   02   05:00   -0.0172   -0.0213   -0.0040         22.15     3.77
WCRX   02   06:46   -0.0036    0.0929    0.0965   S     22.52     3.77
WCRX   03   05:00    0.0639    0.0983    0.0344         23.75     8.74
WCRX   09   06:52    0.0092   -0.2720   -0.2812   B     21.85     8.74
WCRX   10   06:30    0.0196   -0.0064   -0.0260         22.45     9.52
WCRX   11   06:58   -0.0008    0.0805    0.0813   S     22.97     9.52
WCRX   11   06:59    0.0024    0.0844    0.0820   B     23.05     9.17
WCRX   11   07:00   -0.0015    0.0801    0.0816   S     22.97     8.82
WCRX   11   08:19    0.0006   -0.0783   -0.0789   B     22.72     9.91
WCRX   11   08:32    0.0139   -0.0301   -0.0439         22.77    10.13


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Stock Fetcher

Fetcher Fetcher


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Point & Figure Chart

P & F Chart


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Wall Street Analyzer




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Marketspace Chart

Marketspace Chart



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Time Series Forecast

Time Series 1 Time Series 2


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Neural Network Prediction

"Neurostock" can only track long trades. Therefore its performance, as tracked by itself on stocks which are consistently falling, may not appear as good as it could if each "sell" signal were a "short sale."

Neural Chart Heading
Neural Trades Neural Prediction



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Ultimate Trading Systems

The corresponding trades for the above chart are shown in tabular form below.



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Recommendation

Decision Weighting Factors
FactorsWeighted Points
News + 1
Comparison + 1
Industry - 1
Bond Issue - 1
Zenith Index + 1
GAAP vs. non-GAAP Earnings < 1%+ 1
Cash Flow + 1
Ratios + 1
Market Grader + 1
Intrinsic Value DCF + 1
Intrinsic Value DDM + 1
Stock Scout 0
Projected Earnings + 1
Research Reports - 1
Analysts + 1
Executive Perquisites + 1
Insider Activity + 1
Institutional Activity - 1
Management Reporting + 1
Short Interest - 1
Sentiment + 1
Standard & Poor's + 1
Moving Average - 1
Stock Fetcher - 1
Point & Figure + 1
Wall Street Analyzer - 1
Marketspace Chart - 1
Time Series Chart - 1
Neural Network - 1
Stock Options + 1
Ultimate Trading Systems + 1
Total + 8
Place 1,320 shares of Warner Chilcott PLC (WCRX) on the Active List.