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NPS Pharmaceuticals (NPSP) Marked As A Barbarian At The Gate

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 NPS Pharmaceuticals (NPSP) 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 NPS Pharmaceuticals as such a stock due to the following factors:

  • NPSP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $42.6 million.
  • NPSP has traded 1.3 million shares today.
  • NPSP traded in a range 249.4% of the normal price range with a price range of $3.08.
  • NPSP traded above its daily resistance level (quality: 89 days, meaning that the stock is crossing a resistance level set by the last 89 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 NPSP:

NPS Pharmaceuticals, Inc., a biopharmaceutical company, engages in the development of therapeutic products in the United States. Its lead product is Gattex for the treatment of adult patients with short bowel syndrome (SBS) who are dependent on parenteral support. Currently there are 9 analysts that rate NPS Pharmaceuticals a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for NPS Pharmaceuticals has been 2.1 million shares per day over the past 30 days. NPS has a market cap of $3.3 billion and is part of the health care sector and drugs industry. The stock has a beta of 0.33 and a short float of 7.6% with 4.74 days to cover. Shares are up 4.9% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates NPS Pharmaceuticals as a sell. The company's weaknesses can be seen in multiple areas, such as its weak operating cash flow, poor profit margins and generally high debt management risk.

Highlights from the ratings report include:

  • Net operating cash flow has significantly decreased to -$6.92 million or 180.51% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The gross profit margin for NPS PHARMACEUTICALS INC is currently extremely low, coming in at 6.43%. Regardless of NPSP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, NPSP's net profit margin of -2.77% significantly underperformed when compared to the industry average.
  • Currently the debt-to-equity ratio of 1.69 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 4.42, which shows the ability to cover short-term cash needs.
  • Compared to other companies in the Biotechnology industry and the overall market, NPS PHARMACEUTICALS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • This stock has increased by 246.55% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the future course of this stock, we feel that the risks involved in investing in NPSP 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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