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Barbarian At The Gate: Vanda Pharmaceuticals (VNDA)

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 Vanda Pharmaceuticals (VNDA) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Vanda Pharmaceuticals as such a stock due to the following factors:

  • VNDA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $21.5 million.
  • VNDA has traded 15.2 million shares today.
  • VNDA traded in a range 279.1% of the normal price range with a price range of $1.93.
  • VNDA traded above its daily resistance level (quality: 52 days, meaning that the stock is crossing a resistance level set by the last 52 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' 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 positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on VNDA:

Vanda Pharmaceuticals, Inc., a biopharmaceutical company, offers development and commercialization of products for the treatment of central nervous system disorders. Currently there are 4 analysts that rate Vanda Pharmaceuticals a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Vanda Pharmaceuticals has been 800,900 shares per day over the past 30 days. Vanda has a market cap of $207.1 million and is part of the health care sector and drugs industry. The stock has a beta of 1.90 and a short float of 15.3% with 2.58 days to cover. Shares are up 68.6% year to date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Vanda Pharmaceuticals as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income and weak operating cash flow.

Highlights from the ratings report include:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Biotechnology industry. The net income has decreased by 1.0% when compared to the same quarter one year ago, dropping from -$5.33 million to -$5.38 million.
  • Net operating cash flow has declined marginally to -$10.27 million or 1.05% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, VANDA PHARMACEUTICALS INC has marginally lower results.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Biotechnology industry and the overall market, VANDA PHARMACEUTICALS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • VANDA PHARMACEUTICALS INC has improved earnings per share by 10.5% 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, VANDA PHARMACEUTICALS INC reported poor results of -$0.98 versus -$0.36 in the prior year. This year, the market expects an improvement in earnings (-$0.62 versus -$0.98).
  • Investors have driven up the company's shares by 75.90% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the future course of this stock, we feel that the risks involved in investing in VNDA do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.

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