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Trade-Ideas: Vertex Pharmaceuticals (VRTX) Is Today's "Barbarian At The Gate" Stock

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 Vertex Pharmaceuticals (VRTX) 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 Vertex Pharmaceuticals as such a stock due to the following factors:

  • VRTX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $136.2 million.
  • VRTX has traded 1.7 million shares today.
  • VRTX traded in a range 213.6% of the normal price range with a price range of $3.99.
  • VRTX traded above its daily resistance level (quality: 179 days, meaning that the stock is crossing a resistance level set by the last 179 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 VRTX with the Ticky from Trade-Ideas. See the FREE profile for VRTX NOW at Trade-Ideas

More details on VRTX:

Vertex Pharmaceuticals Incorporated engages in discovering, developing, manufacturing, and commercializing small molecule drugs for patients with serious diseases. Currently there are 13 analysts that rate Vertex Pharmaceuticals a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Vertex Pharmaceuticals has been 1.8 million shares per day over the past 30 days. Vertex has a market cap of $19.2 billion and is part of the health care sector and drugs industry. The stock has a beta of -0.09 and a short float of 2.6% with 3.57 days to cover. Shares are up 10.5% year-to-date as of the close of trading on Friday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Vertex Pharmaceuticals 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 and weak operating cash flow.

Highlights from the ratings report include:

  • VERTEX PHARMACEUTICALS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, VERTEX PHARMACEUTICALS INC swung to a loss, reporting -$0.50 versus $0.04 in the prior year. For the next year, the market is expecting a contraction of 440.0% in earnings (-$2.70 versus -$0.50).
  • 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 115.7% when compared to the same quarter one year ago, falling from -$57.54 million to -$124.13 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 Biotechnology industry and the overall market, VERTEX PHARMACEUTICALS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$13.72 million or 112.94% 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 revenue fell significantly faster than the industry average of 10.6%. Since the same quarter one year prior, revenues fell by 34.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

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