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Perilous Reversal Stock: Valeant Pharmaceuticals International (VRX)

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

  • VRX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $35.6 million.
  • VRX has traded 515,864 shares today.
  • VRX is down again today.
  • VRX was up 5.2% Friday.
  • VRX was down 3.1% on Thursday.

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More details on VRX:

Valeant Pharmaceuticals International, Inc., a specialty pharmaceutical company, develops, manufactures, and markets pharmaceutical products and medical devices in the areas of neurology, dermatology, and branded generics. The stock currently has a dividend yield of 0.9%. Currently there are 9 analysts that rate Valeant Pharmaceuticals International a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for Valeant Pharmaceuticals International has been 1.2 million shares per day over the past 30 days. Valeant Pharmaceuticals International has a market cap of $35.2 billion and is part of the health care sector and drugs industry. The stock has a beta of 1.43 and a short float of 1.9% with 2.50 days to cover.

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 Valeant Pharmaceuticals International as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share and deteriorating net income.

Highlights from the ratings report include:

  • VRX's very impressive revenue growth greatly exceeded the industry average of 2.8%. Since the same quarter one year prior, revenues leaped by 74.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, VRX's share price has jumped by 89.02%, exceeding the performance of the broader market during that same time frame. Although VRX had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
  • The gross profit margin for VALEANT PHARMACEUTICALS INTL is rather high; currently it is at 55.18%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, VRX's net profit margin of -63.12% significantly underperformed when compared to the industry average.
  • VALEANT PHARMACEUTICALS INTL has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern earnings per share over the past two years. During the past fiscal year, VALEANT PHARMACEUTICALS INTL swung to a loss, reporting -$0.38 versus $0.50 in the prior year.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Pharmaceuticals industry. The net income has significantly decreased by 12830.5% when compared to the same quarter one year ago, falling from $7.65 million to -$973.24 million.

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