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Barbarian At The Gate: Auxilium Pharmaceuticals (AUXL)

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 Auxilium Pharmaceuticals (AUXL) 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 Auxilium Pharmaceuticals as such a stock due to the following factors:

  • AUXL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $22.7 million.
  • AUXL has traded 1.2 million shares today.
  • AUXL traded in a range 258.9% of the normal price range with a price range of $1.67.
  • AUXL traded above its daily resistance level (quality: 468 days, meaning that the stock is crossing a resistance level set by the last 468 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 AUXL:

Auxilium Pharmaceuticals, Inc., a specialty biopharmaceutical company, together with its subsidiaries, focuses on developing and marketing pharmaceutical products in urology and sexual health worldwide. AUXL has a PE ratio of 10.3. Currently there are 8 analysts that rate Auxilium Pharmaceuticals a buy, 1 analyst rates it a sell, and 1 rates it a hold.

The average volume for Auxilium Pharmaceuticals has been 952,600 shares per day over the past 30 days. Auxilium has a market cap of $1.1 billion and is part of the health care sector and drugs industry. The stock has a beta of 1.08 and a short float of 12.8% with 6.93 days to cover. Shares are up 12.1% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Auxilium Pharmaceuticals as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and feeble growth in the company's earnings per share.

Highlights from the ratings report include:

  • AUXL's very impressive revenue growth greatly exceeded the industry average of 1.1%. Since the same quarter one year prior, revenues leaped by 52.2%. 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.
  • 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 Pharmaceuticals industry and the overall market, AUXILIUM PHARMA INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • Currently the debt-to-equity ratio of 1.94 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Even though the debt-to-equity ratio is weak, AUXL's quick ratio is somewhat strong at 1.14, demonstrating the ability to handle short-term liquidity needs.
  • 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 175.4% when compared to the same quarter one year ago, falling from -$10.49 million to -$28.89 million.

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