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Trade-Ideas: Onyx Pharmaceuticals (ONXX) Is Today's "Water-Logged And Getting Wetter" Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Onyx Pharmaceuticals ( ONXX) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Onyx Pharmaceuticals as such a stock due to the following factors:

  • ONXX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $292.6 million.
  • ONXX has traded 897,430 shares today.
  • ONXX traded in a range 211.2% of the normal price range with a price range of $0.62.
  • ONXX traded below its daily resistance level (quality: 4 days, meaning that the stock is crossing a resistance level set by the last 4 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in ONXX with the Ticky from Trade-Ideas. See the FREE profile for ONXX NOW at Trade-Ideas

More details on ONXX:

Onyx Pharmaceuticals, Inc., a biopharmaceutical company, engages in the development and commercialization of therapies that target the molecular mechanisms that cause cancer in the United States and internationally. Currently there are 3 analysts that rate Onyx Pharmaceuticals a buy, no analysts rate it a sell, and 9 rate it a hold.

The average volume for Onyx Pharmaceuticals has been 3.2 million shares per day over the past 30 days. Onyx has a market cap of $9.1 billion and is part of the health care sector and drugs industry. The stock has a beta of 2.01 and a short float of 6.7% with 1.77 days to cover. Shares are up 64.8% year to date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Onyx Pharmaceuticals as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.

Highlights from the ratings report include:

  • ONXX's very impressive revenue growth greatly exceeded the industry average of 9.4%. Since the same quarter one year prior, revenues leaped by 110.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • ONXX's debt-to-equity ratio is very low at 0.16 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 7.86, which clearly demonstrates the ability to cover short-term cash needs.
  • ONYX PHARMACEUTICALS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ONYX PHARMACEUTICALS INC swung to a loss, reporting -$2.92 versus $0.94 in the prior year. This year, the market expects an improvement in earnings (-$1.64 versus -$2.92).
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Biotechnology industry and the overall market, ONYX PHARMACEUTICALS INC's return on equity significantly trails that of both the industry average and the S&P 500.

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