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Vivus (VVUS) Showing Signs Of Perilous Reversal Today

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

  • VVUS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $16.0 million.
  • VVUS has traded 3.4 million shares today.
  • VVUS is down 3.1% today.
  • VVUS was up 6% yesterday.

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More details on VVUS:

VIVUS, Inc., a biopharmaceutical company, engages in developing and commercializing therapies to address unmet needs in obesity, sleep apnea, diabetes, and sexual health. Currently there are 3 analysts that rate Vivus a buy, 2 analysts rate it a sell, and 5 rate it a hold.

The average volume for Vivus has been 2.3 million shares per day over the past 30 days. Vivus has a market cap of $979.4 million and is part of the health care sector and drugs industry. The stock has a beta of 2.01 and a short float of 35.1% with 18.69 days to cover. Shares are down 28.2% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Vivus as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, generally disappointing historical performance in the stock itself and generally high debt management risk.

Highlights from the ratings report include:

  • VIVUS INC's earnings per share declined by 20.0% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, VIVUS INC reported poor results of -$1.40 versus -$0.56 in the prior year. For the next year, the market is expecting a contraction of 33.6% in earnings (-$1.87 versus -$1.40).
  • 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 decreased by 19.3% when compared to the same quarter one year ago, dropping from -$40.40 million to -$48.20 million.
  • 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 Pharmaceuticals industry and the overall market, VIVUS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, VVUS has underperformed the S&P 500 Index, declining 12.54% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The debt-to-equity ratio of 1.36 is relatively high when compared with the industry average, suggesting a need for better debt level management. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 6.08, which shows the ability to cover short-term cash needs.

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