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Stock To Watch: Dendreon (DNDN) In Perilous Reversal

Stock quotes in this article: DNDN

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 Dendreon ( DNDN) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Dendreon as such a stock due to the following factors:

  • DNDN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $21.7 million.
  • DNDN has traded 2.3 million shares today.
  • DNDN is down 3.9% today.
  • DNDN was up 11.1% yesterday.

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More details on DNDN:

Dendreon Corporation, a biotechnology company, engages in the discovery, development, and commercialization of novel therapeutics to enhance cancer treatment options for patients. Currently there are 2 analysts that rate Dendreon a buy, 8 analysts rate it a sell, and 7 rate it a hold.

The average volume for Dendreon has been 4.4 million shares per day over the past 30 days. Dendreon has a market cap of $470.0 million and is part of the health care sector and drugs industry. The stock has a beta of 3.67 and a short float of 38.5% with 7.47 days to cover. Shares are down 43.7% 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 Dendreon as a sell. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself and weak operating cash flow.

Highlights from the ratings report include:

  • DNDN's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 40.05%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • Net operating cash flow has decreased to -$51.50 million or 17.27% when compared to the same quarter last year. Despite a decrease in cash flow DENDREON CORP is still fairing well by exceeding its industry average cash flow growth rate of -64.29%.
  • DNDN, with its decline in revenue, underperformed when compared the industry average of 10.1%. Since the same quarter one year prior, revenues slightly dropped by 8.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • DENDREON CORP has improved earnings per share by 30.8% 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, DENDREON CORP reported poor results of -$2.65 versus -$2.31 in the prior year. This year, the market expects an improvement in earnings (-$1.75 versus -$2.65).
  • The gross profit margin for DENDREON CORP is rather high; currently it is at 51.12%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -93.89% is in-line with the industry average.

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