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Trade-Ideas: WuXi PharmaTech (WX) Is Today's "Dead Cat Bounce" 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 WuXi PharmaTech ( WX) as a "dead cat bounce" (down big yesterday but up big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified WuXi PharmaTech as such a stock due to the following factors:

  • WX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $18.3 million.
  • WX has traded 576,956 shares today.
  • WX is up 3% today.
  • WX was down 5.6% yesterday.

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More details on WX:

Wuxi PharmaTech (Cayman) Inc., through its subsidiaries, operates as a pharmaceutical, biotechnology, and medical device research and development outsourcing company in China and the United States. It operates in two segments, Laboratory Services and Manufacturing Services. WX has a PE ratio of 20.9. Currently there are 8 analysts that rate WuXi PharmaTech a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for WuXi PharmaTech has been 322,500 shares per day over the past 30 days. WuXi PharmaTech has a market cap of $2.0 billion and is part of the health care sector and health services industry. Shares are up 80.8% year to date as of the close of trading on Friday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates WuXi PharmaTech as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, increase in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:

  • Powered by its strong earnings growth of 46.42% and other important driving factors, this stock has surged by 87.30% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, WX should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • WUXI PHARMATECH (CAYMAN)-ADR has improved earnings per share by 46.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, WUXI PHARMATECH (CAYMAN)-ADR increased its bottom line by earning $1.19 versus $1.07 in the prior year. This year, the market expects an improvement in earnings ($1.64 versus $1.19).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Life Sciences Tools & Services industry. The net income increased by 44.5% when compared to the same quarter one year prior, rising from $20.49 million to $29.62 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.6%. Since the same quarter one year prior, revenues slightly increased by 9.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • WX's debt-to-equity ratio is very low at 0.10 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 2.56, which clearly demonstrates the ability to cover short-term cash needs.

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