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Watch Out: Barbarians At The Gate For Regeneron Pharmaceuticals (REGN)

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 Regeneron Pharmaceuticals ( REGN) 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 Regeneron Pharmaceuticals as such a stock due to the following factors:

  • REGN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $202.0 million.
  • REGN has traded 417,400 shares today.
  • REGN traded in a range 208% of the normal price range with a price range of $15.99.
  • REGN traded above its daily resistance level (quality: 21 days, meaning that the stock is crossing a resistance level set by the last 21 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.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in REGN with the Ticky from Trade-Ideas. See the FREE profile for REGN NOW at Trade-Ideas

More details on REGN:

Regeneron Pharmaceuticals, Inc., a biopharmaceutical company, discovers, invents, develops, manufactures, and commercializes medicines for the treatment of serious medical conditions in the United States and internationally. REGN has a PE ratio of 38.4. Currently there are 10 analysts that rate Regeneron Pharmaceuticals a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Regeneron Pharmaceuticals has been 742,200 shares per day over the past 30 days. Regeneron has a market cap of $26.7 billion and is part of the health care sector and drugs industry. The stock has a beta of 0.78 and a short float of 6% with 5.32 days to cover. Shares are down 2.4% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Regeneron Pharmaceuticals as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and feeble growth in the company's earnings per share.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 10.6%. Since the same quarter one year prior, revenues rose by 39.6%. 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.
  • REGN's debt-to-equity ratio is very low at 0.29 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 5.35, which clearly demonstrates the ability to cover short-term cash needs.
  • Compared to its closing price of one year ago, REGN's share price has jumped by 45.92%, exceeding the performance of the broader market during that same time frame. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
  • REGENERON PHARMACEUTICALS's earnings per share declined by 27.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, REGENERON PHARMACEUTICALS turned its bottom line around by earning $6.61 versus -$2.44 in the prior year. For the next year, the market is expecting a contraction of 42.4% in earnings ($3.81 versus $6.61).
  • 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 Biotechnology industry. The net income has significantly decreased by 26.2% when compared to the same quarter one year ago, falling from $191.47 million to $141.31 million.

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